CHICAGO — Moody's Investor's Service has downgraded $4.6 billion of Detroit sewer and water system revenue bonds citing a decline in debt service coverage, looming capital needs, and the risks associated with derivatives.

The rating agency lowered its rating to A1 from Aa3 on $1.43 billion of senior lien sewage revenue bonds. About $1 billion of second lien bonds were downgraded to A2 from A1. A negative outlook at the lower level was assigned to the debt that is secured by net revenues of the city's sewage disposal system.

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