News Column

Fitch: Few Surprises for Bondholders in Detroit LTGO Settlement

July 14, 2014



CHICAGO & NEW YORK--(BUSINESS WIRE)-- Detroit's settlement with its limited tax general obligation (LTGO) bondholders is in line with Fitch Ratings expectations.

The settlement would repay the LTGO bondholders without a lien on state aid 34 cents on the dollar. That exceeds earlier offers of 10-20%. A previous settlement agreement provides for ULTGO bondholder recovery of 74 cents on the dollar and includes a clause requiring LTGO bondholders (and other classes of impaired unsecured creditors) to receive lower recovery. The city has $164 million of LTGOs without a lien on state aid and $379 million of LTGOs with a state aid lien. A court will begin hearing the plan of confirmation on August 14.

Detroit's treatment of LTGO and other bondholders strains the boundaries of what most creditors would have expected to be entitled to in a bankruptcy.

Fitch expects situations like Detroit's to continue to be rare as few governments are as severely stressed as and there is a long-demonstrated willingness of most municipal governments to avoid default and bankruptcy. Also, the nation's slow economic recovery has begun to lessen the financial stress on many other issuers.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Amy Laskey, +1 212-908-0568

Managing Director

U.S. Public Finance

33 Whitehall Street

New York, NY

or

Rob Rowan, +1 212-908-9159

Senior Director

Fitch Wire

or

Media Relations:

Elizabeth Fogerty, +1 212-908-0526

elizabeth.fogerty@fitchratings.com


Source: Fitch Ratings


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Source: Business Wire


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