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Thursday, July 18, 2013

Detroit Files for Bankruptcy

by Calculated Risk on 7/18/2013 05:02:00 PM

From the WSJ: Detroit Files for Chapter 9 Bankruptcy

The city of Detroit filed for federal bankruptcy protection on Thursday afternoon ... the country's largest-ever municipal bankruptcy case.
The financial outlook has never been bleaker for the Motor City, which has shrunk from its peak of nearly two million people in 1950 to 700,000 today.
Most at risk under the bankruptcy case is the city's $11 billion in unsecured debt. That includes almost $6 billion in health and other benefits for retirees; more than $3 billion for retiree pensions; and about $530 million in general-obligation bonds.
The prediction of “hundreds of billions” of dollars in municipal bond defaults in 2011 never happened, however this one has been in the works for some time. A shrinking population makes the situation very difficult.

More from Brad Plummer at the WaPo: Detroit just filed for bankruptcy. Here’s how it got there.
To get a better sense of just how Detroit got into such dire straits, it’s worth browsing through the city’s official “Proposals for Creditors” from June and a separate May report on the city’s finances. Emergency manager Kevyn Orr laid out all the problems and economic headwinds facing Detroit ...