Standard & Poor's Ratings Services today revised upward its outlook on the city of Detroit's general obligation bonds, from 'negative' to 'stable. The ratings upgrade affects the city's unlimited- and limited-tax general obligation bonds and its pension obligation certificates. S&P affirmed its 'B' ratings on the bonds.
In its note announcing the revised outlook, S&P cited the appointment of an emergency manager by the state's governor as "a positive step toward regaining structural balance and improving the city's overall financial condition." A cynic might ask how Detroit's condition could get any worse.
The negative outlook was assigned to Detroit's rating a year ago, before the consent agreement between the city and the state was enacted. S&P noted that "[s]ince that time, the city has made changes, but the pace has been slow, exacerbated by distractions within city government." Like the conviction of former mayor Kwame Kilpatrick on federal corruption charges. That'll take your eye off the ball for sure.
Michigan's governor yesterday appointed experienced bankruptcy lawyer Kevyn Orr as the city's emergency financial manager. Orr will have to figure out how to deal with $14 billion in long-term debt, cash shortages, and a growing number of citizens' complaints.
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