July 3 Standard & Poor's Ratings Services on
Wednesday pushed the investment grade ratings on $5.42 billion
of Detroit water and sewage revenue bonds down into the junk
category, citing uncertainty over a potential restructuring of
the debt by the emergency manager running the city.
Kevyn Orr, the corporate bankruptcy attorney picked by the
state of Michigan in March to manage its biggest city, last
month proposed spinning off Detroit's water and sewer services
into an independent authority that could redeem or restructure
outstanding revenue debt.
S&P said under a restructuring the repayment terms could
change, including principal and interest amounts and the
amortization schedule. It added that the lower BB-minus ratings
were placed on a watch list until a clearer plan emerges for the
senior-lien water and sewage bonds, which had been rated A-plus,
and the second-lien bonds, which had been rated A.
The agency also said the ratings could drop further to the C
category if a debt restructuring or negotiated exchange of the
debt is likely to, or will, occur.
Detroit's credit ratings progressively fell into the junk
category as its fiscal problems mushroomed, culminating with the
appointment of Orr who has said there is a 50/50 chance the city
could file what would be the biggest Chapter 9 municipal