Moody's: Detroit bankruptcy filing credit negative

WASHINGTON, July 18 Thu Jul 18, 2013 7:33pm EDT

WASHINGTON, July 18 (Reuters) - The bankruptcy filing by Detroit, Michigan, is a credit negative, Moody's Investors Service said late Thursday, because it creates uncertainty for bondholders, will likely interrupt payments on general obligation and limited tax bonds, and begins a process that may span years.

"While not unexpected, the filing opens the door to what will likely be an unprecedented litigation scenario," said the major rating agency. "Before issues like bondholder recovery levels and what level of services city residents will experience become clear, the bankruptcy is likely to be a complicated and protracted process."

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