* Moody's assigned a negative outlook to new ratings
* Weaker oversight by Michigan after elections
Nov 28 Moody's Investors Service lowered
Detroit's debt ratings deeper into junk territory on Wednesday
and warned there was a higher risk the cash-strapped city could
default on bonds or file for bankruptcy.
The credit rating agency, which placed Detroit on review for
possible downgrades in June, assigned a negative outlook to the
lowered ratings, citing "the rising possibility that the city
could file for bankruptcy or default on an obligation over the
next 12 to 24 months."
Moody's also pointed out that oversight of the city's
finances by the state of Michigan was weakened when voters
earlier this month repealed a 2011 law that beefed up the
state's power to aid financially struggling local governments.
Another factor playing into Detroit's rating woes is its
"ongoing inability to implement reforms necessary to regain
financial stability," Moody's said.
Detroit's city council has resisted certain reform measures
supported by Mayor Dave Bing, state officials and an oversight
board. Last week, the nine-member council rejected a contract
with law firm Miller Canfield to work on the city's financial
stability deal with the state, which had set the contract as one
of the goals Detroit must meet to obtain a $10 million cash
infusion this month.
Bing subsequently said the city, which was on track to run
out of money by the end of December, would turn to unpaid
temporary leaves for workers and other cuts to stop that from
A spokesman for Bing declined to comment on the Moody's
downgrades. Spokespersons for City Council President Charles
Pugh and for Michigan's governor and treasurer did not
immediately respond to a request for comment.
Moody's cut Detroit's unlimited tax general obligation
rating to Caa1 from B3, its limited tax GO rating to Caa2 from
Caa1 and also downgraded ratings on the city's water and
sewerage revenue bonds. The downgrades affect $8.2 billion of
outstanding debt, according to a Moody's spokesman.