Teetering on the Edge of Bankruptcy, Detroit Defaults on Some Debt

Garden spot

Detroit defaulted on some debt on Friday and proposed that creditors take a drastic cut in the money they are owed by the "insolvent" city in order to avoid the largest municipal bankruptcy filing in U.S. history.

In a meeting with creditors, Detroit Emergency Manager Kevyn Orr announced a moratorium on principal and interest payments on the city's unsecured debt, and for the first time presented a detailed proposal calling on the holders of nearly $17 billion in Detroit debt to make substantial concessions.

Under his proposal, Orr said unsecured debt holders would be paid less than 10 cents on the dollar, but some creditors would get a bit more based on city revenue.

Comments

[AlgerHiss]

The main group that needs screwed in this fiasco are the punk/thug labor unions: They were a large contributor to the original problem.

[JWatts]

According to Bloomberg:

Underfunded pension claims likely would get less than the 10 cents on the dollar.

But the unions are threatening to strike, though at this point there's probably not enough discretionary money to make up the difference. So if they strike, it won't really matter, unless the courts get involved and order the city to turn over what revenues it gets explicitly for secured debt to the unsecured pension funds. It's always easier to screw over a third party, even if you originally agreed to a legally "secured" debt.