Michigan

Litigation is already stalling Detroit's effort to file for Chapter 9 bankruptcy protection.

As detroit enters into what would be the largest municipal bankruptcy in the u.s., ratings agencies said the outcome may have a negative impact on unlimited-tax general obligation bonds in future credit analysis.

WASHINGTON — Rep. John Conyers, Jr. is urging the chairman of the House Judiciary Committee to hold hearings about the increasing number of municipality filings for bankruptcy under Chapter 9 and whether cities are misusing the process to “unilaterally abrogate obligations” otherwise protected by law such as those to retirees and bondholders.

Detroit's massive debt, its limited resources, the desire of state officials to put the city on a path of sustainability, and the huge costs of bankruptcy and other legal proceedings, in combination, virtually assures that holders of the city's debt will likely get cents on the dollar, even those who hold general obligation bonds, muni market participants said Friday.

An Ingham County Judge Friday afternoon said Detroit's bankruptcy filing is unconstitutional and ordered it withdrawn.

Officials overseeing Jefferson County, Ala.'s municipal bankruptcy say they understand the challenges and stigma that Detroit now faces.

Detroit emergency manager Kevyn Orr said Friday he expects an eligibility fight over the city's petition to file for Chapter 9 bankruptcy protection, but that his plan to pay creditors between 10 cents and 20 cents on the dollar should make for a speedy process.

Detroit filed a flurry of court papers late Thursday in support of its historic Chapter 9 request, including an outline of creditor negotiations that says the lack of representation and organization among creditors, including bondholders, made it impossible to reach settlements.

Detroit's bankruptcy filing on Thursday was not unexpected, but market participants say its impact is hard to gauge and that it has negative implications for the market.

Detroit filed for Chapter 9 bankruptcy Thursday, a historic move that marks the largest municipal bankruptcy filing to date. It's also a first for Michigan, and the first time a state's largest city has filed.

Detroit's two retirement systems sued Michigan Gov. Rick Snyder and Detroit emergency manager Kevyn Orr, saying Detroit's "imminent" Chapter 9 bankruptcy would violate state constitutional protections.

Fitch Ratings said Tuesday it's continuing to monitor the $5.9 billion of Detroit water and sewer bonds, but noted that the debt enjoys strong legal protections in or outside of a Chapter 9 filing.

U.S. Bank filed papers Tuesday disputing Syncora Guarantee Inc.'s account of the bank's role in a court battle between the bond insurer and Detroit over the use of casino revenues.

In the sea of junk-rated Detroit debt trading for 30 to 40 cents on the dollar, the piece of the city's defaulted pension certificates that feature Berkshire Hathaway Assurance Corp. continue to see retail bids of nearly 90 cents on the dollar.

Detroit emergency manager Kevyn Orr has reportedly reached an agreement with counterparties on the city's interest-rate swaps that has the creditors taking a 25% haircut.

Michigan's emergency loan board Monday approved a move by Pontiac emergency manager to suspend the city's retiree health care payments for up to two years.

Detroit said in a Monday morning court filing that it had reached an important settlement with a creditor that renders moot an escalating dispute with bond insurer Syncora Guarantee Inc. over casino revenues.

Michigan Gov. Rick Snyder Monday tapped Detroit CFO Jack Martin to be the new emergency manager of the city's troubled school system.

Detroit bondholders may have a new worry after a judge ruled that Jefferson County, Ala., could have paid legal bills for its bankruptcy from cash that was going to pay warrant holders owed $3 billion.