Moody's Investors Service said yesterday that Detroit's bondholders face a heightened chance of default or bankruptcy by the city under the financial recovery plan released on Monday by the state-appointed emergency manager running the city, Reuters reported yesterday. "The plan is negative for Detroit bondholders because it indicates that the city requires 'significant and fundamental debt relief' to help shore up its finances, a clear indication that a default or bankruptcy is a real option," the credit rating agency said in a report. Specifically, the plan Kevyn Orr sent Michigan Treasury officials outlines four ways to restructure Detroit's debt: by pushing principal payments into future years, permanently reducing the amount of principal, lowering interest rates and issuing new debt to provide cash recoveries to creditors. Moody's said Orr's plan cites a "fair and equitable" standard for restructuring the city's finances.
