BLOOMBERG: Detroit Default Threatens Underpinnings of Municipal Bond MarketSubmitted by emalvini on Sat, 06/22/2013 - 16:15
BLOOMBERG: Detroit Default Threatens Underpinnings of Municipal Bond Market
By Brian Chappatta & Martin Z. Braun - Jun 16, 2013 9:01 PM PT
Emergency Manager Kevyn Orr’s plan to suspend payments on $2 billion of Detroit’s debt threatens a basic tenet of the $3.7 trillion municipal market: that states and cities will raise taxes as high as needed to avoid default.
Orr, appointed by Republican Governor Rick Snyder to oversee Michigan’s largest city, proposed a deal last week that included skipping a $39.7 million payment on pension-obligation debt. The city is also set to default on unsecured unlimited-tax and limited-tax general-obligation bonds as it grapples with $17 billion in liabilities to avoid a record bankruptcy.