Michael Sweet was quoted in the Reuters article "Detroit Bankruptcy Bond Fight a Watershed for Municipal Market." While the full text can be found in the February 17, 2014, issue of Reuters, a synopsis is noted below.
Detroit's attempts to declare some of its general obligation bonds as unsecured debt will be challenged in bankruptcy court Wednesday in what could be a precedent-setting turn in the case.
Judge Steven Rhodes will be tasked with ruling on whether a pledge of Detroit tax revenue to pay off voter-approved bond issues is a binding obligation under state law, as argued by bond issuers, or merely a promise.
"This is a significant issue for the bond community, not just in Detroit but in all cases, because the implication is that if the court finds these aren't secured, this will go far beyond Detroit," said Michael Sweet.
According to Sweet, if the bond insurers lose, the main effect will be that liens and other protections will be better documented for future deals.
"It doesn't mean there won't be deals," he said. "They will just be more careful."
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