The Wall Street Journal reports:
General-obligation bondholders will continue to be treated as unsecured creditors, Detroit's emergency manager, Kevyn Orr, said in an interview Friday in New York, adding that he is focused on fixing Detroit and not on the implications the restructuring could have on the broader municipal-bond market.
Mr. Orr said he has heard a number of arguments about how the general-obligation bonds—a fraction of Detroit's approximately $18 billion in debt—should be treated.
"My job, the contract I signed, the covenant I have with the state and the governor…doesn't say put the city on sustainable footing while taking into consideration the impact this might have on the broader general-obligation market," he said. "No, it's just: Put the city on sustainable footing."
There's more:
At issue in particular is about $530 million in general-obligation bonds—some of which are unlimited-tax-revenue bonds. Because payments on such bonds are backed by tax revenue and the pledge to raise taxes as needed for repayment, most investors consider the bonds safe and secure.
Some municipal-finance experts object to Detroit's decision to classify certain general-obligation bonds as unsecured debts, offering bondholders just pennies on the dollar for repayment. They have been pushing for special treatment and a less-onerous so-called haircut.
"I understand the strategy of trying to break out from the [unsecured creditor] herd and say, 'I'm different,' " Mr. Orr said. "But, from our perspective, unsecured creditors share in the unsecured creditor pool."
History in the making. It's not like we didn't warn you in
2009.
