April 14 (Bloomberg) — Bankrupt Detroit's agreement with bondholders to pay 74 percent of general-obligation unlimited tax debt is a credit positive because it elevates it to secured status, according to Moody's Investors Service.
The deal struck last week is a sign of progress in negotiations to exit bankruptcy and would shift 26 percent of $388 million in claimed liabilities to pensions and to overdue payments on debt, according to the report today from Genevieve Nolan and James Eck.
State-appointed Emergency Manager Kevyn Orr earlier proposed a 15 percent recovery for general-obligation bondholders as unsecured debt. The new agreement helps bond insurers National Public Finance Guarantee Corp., Assured Guaranty and Ambac, Moody's said. Moody's rates Detroit debt Caa3 — nine steps into noninvestment grade — with a negative outlook.
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