Muni Think

Over the years, Detroit's financial deterioration and the city's downturn have been well documented, so its bankruptcy filing came as little surprise to most market participants. This point can be reinforced by Interactive Data's analysis below of six different bonds issued by Detroit and related entities, which are representative of the types of debt and structures Detroit has issued.

A recent study of the economics of advance refundings asserts the provocative conclusion that "[t]he widespread practice of advance refundings of municipal bonds is, at best, zero net present value, though wasteful of fees." This study may well compel a counter-study from the many proponents of advance refundings.

Herbert J. Sims' Richard Larkin does not believe that Detroit had to file for Chapter 9 municipal bankruptcy.

The Detroit bankruptcy doesn't necessarily undermine the market for general obligation debt for all governmental borrowers.

Chicken Little is alive and well after Detroit's filing for Chapter 9 bankruptcy protection.

Build America Mutual details the actuarial analyses of pension and other postemployment liabilities that it incorporates in its review of every municipal bond it insures.

It has been just over a month since Detroit's emergency financial manager Kevyn Orr announced to our market that Detroit would treat its GO bondholders as "unsecured" creditors and pay them only pennies on the dollar. It is past time for the bond market to forcefully react.

It looked and felt like the sequel to Man of Steel had arrived prematurely, but this time, General Zod seemed to set his sights on the bond market, recruiting an army of bond fund managers to annihilate everything from one-year Treasuries to 30-year corporate and municipal bonds.

Savvy indenture trustees and bondholders familiar with the Chapter 11 process understand that being ahead of the curve often provides key advantages. What is less understood is that proactivity is even more important in Chapter 9 (municipal) bankruptcy situations, and often must predate any bankruptcy filing by several months.

Michael Decker's recent letter offers nine criticisms of our report on municipal bond markups. I briefly address his comments in the order they appear so your readers can evaluate his arguments fairly.