Detroit Files Chapter 9: What Lies Ahead?
Posted by Larry Doyle on July 19, 2013 12:23 PM |
With no surprise to absolutely anybody, the City of Detroit filed bankruptcy yesterday via Chapter 9.
How does an entity such as Detroit get to the point of being 18 billion in debt? Well, I addressed that point a month ago in writing, Detroit: D is for Disaster.
There will be years worth of likely challenging negotiations and contested legal battles among Detroit’s creditors (primarily the pensioners and bondholders). Those within the municipal bond market and beyond will be watching this play out with bated breath.
Although I could take a gratuitous shot at our President and others within his administration for their oft-stated lines about saving Detroit during the 2012 campaign, I will allow others to swing that cudgel. For an insider’s view as to what lies ahead for the Motor city, let’s navigate and review a brief clip provided by the WSJ:
Make no mistake about it, this situation in Detroit is exceptionally sad and will impact many people in a very meaningful way. Heck, it already has.
Will this disaster be brought by some effected — those pensioners — back to the doors of 1600 Pennsylvania Avenue in the hope of some sort of backdoor federal bailout or other form of convoluted payoff?
Beyond that, though,will we learn the necessary lessons that come along with Detroit’s filing Chapter 9 in terms of prudent fiscal management and political accountability?
Only time will tell.
I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.