Moody's Investors Service said that the city of Detroit would have a potential path to bankruptcy court under a state-appointed emergency financial manager, posing risks to the city's bondholders, Reuters reported yesterday. The credit ratings agency, which rates the city of Detroit with a negative outlook of "Caa1," said that the appointment of a manager under a current Michigan law or a new law that takes effect later this month "would be one procedural step closer to a bankruptcy filing" that could lead to delayed or reduced payments to bondholders. The manager could ultimately recommend a chapter 9 bankruptcy as the best remedy for Detroit. A bankruptcy filing by Detroit, which could be blocked by Michigan officials, would be the largest ever in the United States.
