CHICAGO -- Detroit's bankruptcy may be "profoundly meaningful" for other distressed local governments, setting a precedent for how to deal with liabilities, litigating key questions about pension versus bond debt, and clarifying the strength of various bond securities, Moody's Investors Service said in a report Friday.

"Detroit's bankruptcy could set a standard, if not a legal precedent, for how other distressed cities approach their long-term liabilities, especially the relative seniority of pension versus debt obligations," Moody's said.

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