Moody's Investors Service has downgraded the City of Detroit's (MI) General Obligation Unlimited Tax (GOULT) and Certificates of Participation (COPs) ratings to Caa1 from B3, and has also downgraded the city's General Obligation Limited Tax (GOLT) rating to Caa2 from Caa1.
These downgrades reflect the city's ongoing precariously narrow cash position and a weakened state oversight framework following the repeal of Public Act 4 (PA 4). The city's GO, COPs and GOLT ratings have been removed from review for possible downgrade and the outlook has been revised to negative. The negative outlook on the GO, COPS and GOLT ratings is based on the rising possibility that the city could file for bankruptcy or default on an obligation over the next 12 to 24 months, the general uncertainty of state oversight as challenges to Public Act 72 (PA72) persist following the repeal of PA 4, and the city's ongoing inability to implement reforms necessary to regain financial stability.
Concurrently, Moody's has downgraded the ratings for the Detroit Water and Sewage Enterprise Revenue debt one notch to Baa3 (Senior Lien) and
Ba1 (Second Lien) as the rising risk of a city bankruptcy filing brings ongoing uncertainty regarding the treatment of these securities in the event of a filing. Ratings for the Detroit Water and Sewage Enterprise Revenue Bonds have been removed from review for possible downgrade and the outlook has been revised to negative. The negative outlook for the water and sewer debt is based on the increasing possibility that the city could file for bankruptcy over the next 12 to 24 months.