CHICAGO — Moody's Investors Service downgraded Detroit Thursday, a day after Standard & Poor's hit the city with a four-notch downgrade and a day before the city's emergency manager is set to meet with creditors to announce a restructuring plan.

The downgrade means all the city's $5.9 billion of water and sewer bonds lost their investment-grade rating from Moody's.

The rating agency downgraded the city's $1.5 billion of pension certificates by two notches, to Caa3 from Caa1, reflecting the lack of a dedicated revenue stream and uncertainty of a judgement lien in the case of a default. The pension COPs are considered among the city's most unsecured debt.

"The downgrades reflect the increased likelihood of a bankruptcy filing, a major general debt restructuring, or a combination of the two," Moody's said in the downgrade release. "Should default or bankruptcy occur, the recovery levels for bondholders could potentially be quite low based on recent municipal recovery rates for other distressed local governments."

Moody's cut the city's unlimited tax general obligation bonds to Caa2 from Caa1, and its limited-tax GO bonds to Caa3 from Caa2.

The water and sewer revenue bonds were lowered to Ba1 on the senior-lien debt and Ba2 on the second-lien debt. The water and sewer bonds, backed by revenue from a service area that extends well beyond the Detroit city limits to 127 other communities, are considered among the most secure of the city's debt, but Moody's said the "growing probability of a city bankruptcy filing potentially increases bondholder risks."

All the bonds have been put on review for another possible downgrade.

The water and sewer debt continues to have investment-grade ratings from Standard & Poor's, though the ratings agency Thursday revised its outlook on the sewer debt to negative from stable. The ratings remain A-plus on the senior-lien bonds and A on the second lien.

"The negative outlook reflects additional risks that the system may not be able to generate net revenues that provide more than one times coverage on all annual debt service and pension obligation costs allocated to the sewer fund, as it did in 2012," S&P said in a press release on the outlook revision.

The outlook on the water debt remains stable. The sewer system derives 45% of its revenues from the city of Detroit, while the water system is limited to 20%, said S&P analyst Scott Garrigan. Coverage levels for the sewer bonds dipped below one times in 2010 and 2011, while the water system's coverage did not, he said.

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