CHICAGO — Standard & Poor's revised its outlook on Detroit to stable from negative Friday, a day after Gov. Rick Snyder appointed an emergency financial manager to take over the struggling city.
The outlook revision applies to the city's general obligation bonds and pension obligation certificates. The rating remains B.
"We view the appointment of an emergency manager as a positive step toward regaining structural balance and improving the city's overall financial condition," analyst Jane Hudson Ridley said in a statement.
Snyder appointed bankruptcy attorney Kevyn Orr, a Michigan native and until last week partner at Jones Day, as EM last week. Orr's first day is March 25.
The city has been operating under a consent agreement signed with the state a year ago in an attempt to stabilize its fiscal position.
Standard & Poor's has maintained a negative outlook on the city since before the consent agreement.
"Since that time, the city has made changes, but the pace has been slow, exacerbated by distractions within city government," Ridley said. "The appointment of an EM allows the city to move forward in a more efficient manner, continuing to make the types of adjustments necessary to regain structural balance."
In his first public remarks last week, Orr said he hoped to avoid filing for Chapter 9, but warned that he was willing to use it if the city's creditors, including bondholders, were not willing to negotiate.
Fitch Ratings Friday released a comment saying that it considers the EM appointment positive news for bondholders but that uncertainties — chiefly related to the threat of bankruptcy — remain.
"It seems clear that bondholder payments will be part of the dialogue in the EFM's development of a plan to regain a solid financial footing for the city," Fitch analyst Amy Laskey wrote in the comment.
Fitch added that the EM will be able to unilaterally amend contracts and be free of many of the political tangles that have stalled the city's progress in past years.
"The EFM must submit a financial and operating plan within 45 days of appointment, so some level of clarity may come in the near term," Laskey said.
Fitch rates the city's unlimited-tax GO bonds CCC, its limited-tax GOs CC, and its pension certificates CC with a watch negative.