Major decision coming in Detroit BK case


Closely watched in the municipal bond market and by the monolines (MBI, AGO, AMBC) will be today's decision by a U.S. bankruptcy judge on whether Detroit's pledge to pay on general obligation debt is binding or whether it's merely a promise which a broke city can walk away from.

The impact could be a large one as GO debt has forever been considered secured debt and thus among the safest places to put money. Emergency manager Kevyn Orr has deemed about $410M of city GO paper as unsecured debt, and Detroit on October 1 defaulted on payment.

On the hook for millions of dollars, municipal insurers contend they and bondholders have first call on the property tax revenue necessary to make good on the bonds.

Also maybe coming today will be Orr's plan for restructuring and a bankruptcy exit.

Muni ETFs: MUB, HYD, BAB, PZA, MUNI, TFI, ITM, HYMB, MLN, CMF, XMPT, SHM, BABZ, BABS, SUB, PRB, SMB, PZT, NYF, CXA, SHYD, PWZ, PVI, SMMU, MUAF, INY, MUAE, MUAD, MUAC, VRD, MUAG, GMMB, MUAH, RVNU

Comments (4)
  • RM13
    , contributor
    Comments (1202) | Send Message
     
    Government makes the rules, good luck with that!!!
    19 Feb 2014, 12:35 PM Reply Like
  • Tack
    , contributor
    Comments (16281) | Send Message
     
    In today's politically-correct, anti-business world, I'd place my bets on Detroit, not the bond insurers, regardless of whatever the fine points of the law might suggest.
    19 Feb 2014, 01:13 PM Reply Like
  • Bouchart
    , contributor
    Comments (1105) | Send Message
     
    Agreed. Just look at how GM's bondholders were wiped out.
    19 Feb 2014, 02:06 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (11175) | Send Message
     
    Could be another great chance to build a larger position in the monolines.

     

    Will monitor...
    19 Feb 2014, 02:17 PM Reply Like
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