Seeking Alpha

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 (921) | Send Message
     
    Government makes the rules, good luck with that!!!
    19 Feb 2014, 12:35 PM Reply Like
  • Tack
    , contributor
    Comments (14397) | 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 (803) | Send Message
     
    Agreed. Just look at how GM's bondholders were wiped out.
    19 Feb 2014, 02:06 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (9719) | 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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