(Adds no comment from emergency manager spokesman, Fitch report
Aug 21 The holders of $5.2 billion of Detroit
water and sewer revenue bonds turned in only 28.34 percent of
the debt for repurchase before Thursday's expiration of the
city's tender offer, according to tender agent data.
Real-time data posted online by Bondholder Communications
Group showed nearly $1.47 billion of senior and second lien
bonds were tendered by the 5 p.m. EDT (2100 GMT) deadline set by
the city when it announced the offer on Aug. 7.
Robert Apfel, Bondholder Communications president, said
official results would be announced by Detroit on Friday.
A spokesman for Detroit Emergency Manager Kevyn Orr did not
immediately respond to a request for comment on the apparent
lackluster response to the tender.
The bankrupt city must now determine if enough bonds were
tendered and if sufficient savings would be generated by
refinancing the debt. Detroit on Tuesday released preliminary
sale documents for up to $5.5 billion of refunding water and
sewer bonds that would be sold to pay for the tender.
If the city decides to proceed with the issuance, the bonds
would be sold next week in the municipal market through lead
manager Citigroup Inc or through a private placement with
Detroit turned to the tender offer after most bondholders
rejected the city's plan to adjust $18 billion of debt in voting
this summer. A key U.S. Bankruptcy Court hearing to determine if
that plan is fair and feasible is scheduled for Sept. 2.
If the tender is accomplished, any remaining bonds that were
not tendered would continue to be paid by the city under
However, if the tender offer fails, call protection would be
eliminated or interest rates would be reduced on "impaired"
outstanding water and sewer bonds under the debt adjustment
Fitch Ratings on Thursday said impaired bonds account for
about 43 percent of the debt, adding that Detroit would likely
lose a legal fight to keep the bonds impaired given their
standing as special revenue obligations under the federal
bankruptcy code and provisions in Michigan law and in Detroit's
Fitch said the impairment options would have to be crammed
down on bondholders by the bankruptcy court, a move that would
likely harm the city.
"Impairing otherwise healthy and performing special revenue
debt despite the protections of federal, state and city law may
make it more difficult for Detroit to issue special revenue
obligations in the future," Fitch said in a report.
Credit ratings on the water and sewer bonds fell into the
junk category as Detroit's bankruptcy case, filed more than a
year ago, progressed.
Detroit's Board of Water Commissioners has scheduled a
Friday meeting to evaluate the tender offer results. Approval by
Judge Steven Rhodes, who is overseeing Detroit's biggest-ever
municipal bankruptcy case, is also needed for the bond tender.
(Reporting By Karen Pierog and Lisa Lambert; Editing by Chris
Reese and Tom Brown)