Detroit, the Michigan city that’s on the brink of bankruptcy, had its general-obligation bond rating cut four levels by Standard & Poor’s to CCC- from B.
The so-called superdowngrade of more than three levels “is based on recent announcements from the city’s emergency financial manager that Detroit may take steps to adjust payments to bondholders, as well as immediate plans to meet with bondholders to discuss the city’s financial condition and resources,” S&P said today in a report.
Emergency financial manager Kevyn Orr plans to meet June 14 with more than 100 creditors, union leaders and bond insurers on his preliminary proposal to avert a Chapter 9 bankruptcy filing. He said in a report last month that he would cut debt costs by lengthening payback terms, lowering interest rates or obtaining forgiveness on some obligations.
The CCC- rating is nine steps below investment grade, and “has a currently identifiable vulnerability to default,” according to S&P’s grading scale. The outlook on the city is negative, according to the report.
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