CHICAGO (Standard & Poor’s) Aug. 1, 2014—Standard & Poor’s Ratings Services
said that its ratings on certain CUSIPs of water and sewer revenue bonds
issued by the city of Detroit could differ from its ratings on other similar
CUSIPs, based on their treatment in the final Plan of Adjustment (POA) or
earlier, if we become certain that the list of CUSIPs subject to impairment
would not be changed.
Should the POA be executed in its current form, certain currently outstanding
CUSIPs would be exchanged for new CUSIPs with different interest rates or call
provisions. Because of these potential differences, we would likely view the
exchange as distressed, with the rating on the outstanding to be affected
CUSIPs being lowered to ‘CC’ from ‘CCC’. Moreover, when the actual exchange is
executed, we would likely lower the rating on the affected CUSIPs to ‘D’ from
‘CC’. The POA also designates certain CUSIPs as “non-impaired” with no changes
to any payment terms. The non-impaired CUSIPs will likely carry a different
rating than those that were impaired through the distressed exchange and we
would likely raise our ratings on the non-impaired CUSIPs to a level we think
appropriate based on our view of the fundamental credit quality of the water
or sewer system. The rating assigned to the non-impaired CUSIPs would reflect
our view of the then-current credit conditions of the water or sewer system,
rather than the rating of the CUSIPs pre-bankruptcy.
Primary Credit Analyst: Scott D Garrigan, Chicago (1) 312-233-7014;
[email protected]
Secondary Contact: James M Breeding, Dallas (1) 214-871-1407;
[email protected]