Bond Insurers Sue Detroit Over Default

The Bond Buyer reports:

A trio of bond insurers sued Detroit Friday for defaulting on its general obligation bonds, a challenge that goes to the heart of the city's unprecedented effort to treat its unlimited-tax GO debt as unsecured.

National Public Finance Guarantee Corp., a subsidiary of MBIA Inc., and Assured Guaranty Municipal Corp., filed the lawsuit Friday morning in U.S. Bankruptcy Court, Eastern District of Michigan, Southern Division.

A few hours later, Ambac Assurance filed its own lawsuit. Ambac's lawsuit includes the city's limited-tax GO debt. Together the three insurers wrap all of Detroit's unlimited-tax general obligation debt.

The lawsuits ask federal Judge Steven Rhodes, who is overseeing the city's Chapter 9 case, to force Detroit to set aside property tax revenue raised by voter-approved referenda specifically for various unlimited-tax GOs issued between 1999 and 2008.

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