Detroit faces another cash-flow crisis
(Reuters) - Detroit is projecting it will run out of cash next month unless the state of Michigan releases money due it from a debt sale, the city told its financial advisory board.
The city's report to the board, created as part of a consent agreement Detroit approved in April, said that "absent the availability of escrow proceeds, the city will need to employ other working capital solutions to avoid liquidity crises."
Projections show the city's weekly cash flow at just $4.1 million in mid-December before dropping to a negative $4.8 million at the end of the year.
The city submitted the report to the board on Monday.
The Michigan Finance Authority sold $129 million of bonds for Detroit in August, completing a debt sale aimed at raising $137 million for the cash-strapped city. While Detroit received some of that money, Michigan Treasury officials tied the release of another $30 million this year to Detroit's progress on reforms.
"The Department of Treasury is working with city of Detroit to establish milestones that will allow the release of bond funds being held in escrow and will continue to move the city forward in an expeditious manner," Caleb Buhs, a spokesman for the department, said on Tuesday.
Detroit faced a cash crisis this summer that led to warnings it could default on some bonds, as well as to subsequent downgrades that pounded the city's credit ratings deeper into the junk category.
The cash crunch and a default were subsequently averted by the bond sale.
Detroit also told its oversight board that it began a process last week to find a restructuring adviser to aid the city in analyzing strategies for swap agreements, recommendations for long-term cash flow and other matters.
In October, Moody's Investors Service said it was keeping Detroit on review for potentially another downgrade, citing in part the possible repeal of Michigan's 2011 emergency manager law by voters on November 6. Parts of that law, which was repealed by voters, were used to craft Detroit's consent agreement.
A spokesman for Moody's said on Tuesday that the review will be concluded later this month.
Detroit Mayor Dave Bing announced on Monday that the city lost Chief Operating Officer Chris Brown, who left to join a private wind power systems company. Bing said a process to replace Brown will start immediately.
(Reporting By Karen Pierog; Editing by Dan Grebler)