Detroit Warns of Bankruptcy Risk as City Prepares Bond Sale

[Purveyor]

Source: Bloomberg

By Darrell Preston

March 5 (Bloomberg) -- Detroit, the largest U.S. city whose debt is rated below investment grade, warned investors of the risk of bankruptcy as it prepares to sell $250 million of bonds to help close its budget deficit.

The city told bondholders in a March 2 preliminary offering statement that while it hasn’t taken steps to reorganize under Chapter 9, it may have few other options if its financial condition gets worse. Detroit officials also detailed the steps they would have to take should bankruptcy became necessary.

“If the city’s financial status were to deteriorate further the city’s options to improve its fiscal health may be limited,” Detroit said in the statement. Bondholders “should not expect that their rights to payment and remedies will not be adversely affected by filing under the bankruptcy code.”

Many bond lawyers who oversee the preparation of disclosure statements don’t include language on bankruptcy risk because they consider the risks to be understood by investors, said Paul Maco, a Washington attorney with Vinson & Elkins and former director of the Securities and Exchange Commission’s office of municipal securities, who helped write a book on disclosure practices in the market.

“We are still in a financial crisis but insolvency isn’t on the horizon or on the agenda at this time,” Mayor Dave Bing said in an e-mail from his spokesman, Dan Lijana.

Read more: http://www.bloomberg.com/apps/news?pid=20601110&sid=aMNZYKrBeoac

[WriteDown]

1. The alternate site to Yucca Mountain, Detroit nt

[LisaM]

4. Wow

that's a bit cold.

[Psephos]

5. Except that the wastelands are on the surface, instead of a mile underground.

?w=643&h=806







The area of abandoned land in Detroit is now larger than Boston.

[WriteDown]

6. What the heck happened to the brick on that house?

It doesn't even look to be on the ground.

[Psephos]

8. Stripped and sold.

Prolly adorning someone's period garage or McMansion addition in Chicago.

The ragpickers strip everything from these houses. Interior trim and carpentry, wiring, flooring, doors, pipes, mantels, tubs.

There's no way to explain the pervasive and cold sense of desolation felt when you see these neighborhoods stretching ahead of you as far as your eyes can focus.

[WriteDown]

9. I bought a house...

where the renters took the rolls of fiberglass insulation out of the attic. They also took the entire deck from the backyard. A little different, but it amazed me. Also, has be fearing ever renting a house.

[bluestateguy]

10. I was thinking more like rural Oklahoma

Consequences, you see, for not voting the right way...

[defendandprotect]

2. End the tax cuts on the rich . . now!! Re-regulate capitalism . . .

increase taxes on the wealthy --

[Rapier09]

3. Mayor Bing is a decent man

Yet he faces a horrible situation,if the economy recovers,Detroit may yet be saved but if it doesn't; then they are facing the same situation as Vallejo.

[KamaAina]

11. For those of you just joining us, Vallejo, CA is so far the largest U.S. city to declare bankruptcy

it's an ethnically diverse city of about 120,000 between Oakland and Sacramento.

[tranche]

7. Obama did it.

[sandyj999]

12. A lot of citizens not caring helped do it.

This has not just happened it has been going on for years and years. The bad areas have crept out of the city like a cancer. Areas that once were good have now fallen victim to the decay that has taken a once beautiful city. Sure there are still nice areas but I would say there are more that aren't. Even the car company problems didn't do this, it was started a long time ago. I know, because I have lived here all my life and have seen it happening.

[Yupster]

13. It announces it's broke and then

goes $ 250 million further in debt.

I guess that makes sense to them.

And who are the idiots that will buy these bonds after they warned they may not be able to pay them back.

Maybe the interest rates are really high.