Moody’s cautious on Detroit’s financial outlook

Moody’s Investor Service said Monday that Gov. Rick Snyder’s decision to appoint an emergency financial manager for Detroit could have negative and positive implications for the city’s debtors.

The bond credit-rating agency said Snyder’s historic decision announced last week could help stabilize the city’s budgets, easing the chronic “political and operational challenges that have stymied Detroit’s efforts to right its financial ship and implement the city’s Financial Stability Agreement with the state.”

But Moody’s also notes that Michigan’s new emergency manager law, Public Act 436, which takes effect March 28, also provides a clearer path to a Chapter 9 municipal bankruptcy, an option Snyder, state Treasurer Andy Dillon and many city officials said they want to avoid taking.

Detroit’s bond rating is deep in junk territory, and it needed the state’s assistance last year to float $137 million in bonds to help stay afloat through an ongoing restructuring that Snyder said last week was not adequate to avoid deeper state intervention.

City officials have until March 11 to request a hearing with Snyder to appeal his decision announced Friday that he agrees with a review team’s report that Detroit is in a financial emergency from which it cannot recover on its own. Snyder is expected to name an emergency financial manager sometime this month, barring an unlikely successful appeal from the city.

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Posted by Tribune News Services

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