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Report: Detroit’s bankruptcy could set tone
Report: Detroit’s bankruptcy could set tone
Listen to this articleDETROIT — Moody’s Investors Service says Detroit’s road through bankruptcy could set the tone or precedent for other financially distressed communities.
The report released Friday says it doesn’t anticipate numerous defaults and bankruptcies, but more could come if Detroit successfully reduces and restructures its debt and pension liabilities.
Moody’s says Michigan is one of seven states in which accrued pension benefits are constitutionally protected. Detroit’s bankruptcy could set important precedent for other Michigan municipalities facing similar tensions between pension and bond holders.
The report adds that Detroit’s problems are common but not their magnitude. Other cities carry heavy debt burdens but none has suffered as large a financial loss.
Detroit last week became the nation’s largest city to file for bankruptcy. A bankruptcy judge must determine the city is eligible for bankruptcy.
