Genesee County, Michigan was forced to pull a recent bond offering when lenders weren’t willing to lower the interest rates they were demanding. It’s no small wonder given the horrific state of Michigan finances, one would expect lenders to be a bit punchy about handing out money in the environs of Detroit, America’s largest city ever to go bankrupt. The Wall Street Journal reports:
The postponement underscores the difficulties some other municipal issuers may encounter as they seek to raise funds in coming months amid difficulties in many locales in funding pensions, raising tax revenue and balancing budgets.
Detroit’s emergency manager, Kevyn Orr, has said his mission is to restructure Detroit’s more than $18 billion of debt with the aim of restoring basic services to the city. He has said he isn’t concerned about any contagion effects of the bankruptcy on the broader municipal-bond market.
“We won’t engage in speculation about the potential impact of Detroit’s bankruptcy on our ability to sell bonds, but we certainly share the concern of many cities in Michigan that issue bonds to pay for critical infrastructure improvements, building projects, and other core municipal functions,” said Randy Hannan, a spokesman for the city of Lansing, Michigan’s state capitol.
Detroit’s bankruptcy move followed filings in recent years by Jefferson County, Ala., Stockton, Calif., and Central Falls, R.I., raising concerns about the risks of the $3.7 trillion municipal- bond market.
For Michigan municipalities, Genesee’s trouble highlights the possible knock-on effects of Detroit’s bankruptcy and its tough planned haircut for some city debtholders.