National Public Finance Guarantee Corporation and Assured Guaranty Municipal Corp. — both of which insure Detroit bonds — filed a complaint seeking to block the city from diverting bondpayments to other activities, including paying for services, the Detroit Free Press reported on Saturday. Ambac Assurance, another bond insurer that backs Detroit debt, also filed a similar complaint seeking to force the city to pay its bond obligations. It marks the first big direct showdown between the city and its bondholders, which did not object to the city’s eligibility for chapter 9 bankruptcy. An eligibility trial is wrapping up today, with only labor creditors and retiree groups objecting. The bond insurers argued in a court filing that the city is unlawfully taking tax revenue that was meant for unlimited-tax general obligation bonds and is using it for other purposes. They asked Bankruptcy Judge Steven Rhodes to force the city to redirect the taxes to bondholders.
