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.
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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.
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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 ...