CHICAGO -- JP Morgan Chase chief executive officer Jamie Dimon said he doesn't believe Detroit's bankruptcy or treatment of its bondholders will hurt the state's municipal bond market over the long term, according to the Detroit Free Press.
Dimon met with the Free Press editorial board as part of an announcement that the bank will make a $100 million investment in Detroit over the next five years in the forms of loans and grants. The money will be earmarked for small business, blight removal, and a new light-rail system, among other things.
Dimon told the Free Press that he doesn't believe the city's historic bankruptcy will damage demand for Michigan's local bonds over the long term.
The CEO said "he's not an expert" on the Chapter 9 case, but that "bondholders know they take a risk when they lend money," the paper said. "I don't think it will affect Michigan's borrowing capacity very much."
The city is expected to repay unlimited-tax general obligation bondholders 74 cents on the dollar under an agreement with the three bond insurers who wrap the debt. Proposed recoveries for limited-tax GO bondholders are much lower.
Dimon also told the paper that he's "very sympathetic" to the city's pensioners, who have an average pension of less than $20,000, and said "I personally think they should be protected."
Dimon formally announced the investment May 21 at a press conference with Michigan Gov. Rick Snyder and Detroit Mayor Mike Duggan.
