By Elizabeth Campbell
Bloomberg
Detroit found that investors haven’t forgotten the largest municipal bankruptcy in U.S. history.
The city sold $245 million of bonds, its first offering since emerging from court protection last year. Tax-exempt securities due in 2029, which have the longest maturity, were priced to yield 4.5 percent, according to preliminary data compiled by Bloomberg. That’s almost 2 percentage points more than top-rated debt, even though the bonds have a secured claim on the city’s income-tax collections.
“They are still, yes, paying the price,” said Michael Johnson, managing partner at Gurtin Fixed Income Management, which oversees $9.5 billion of munis in Solana Beach, California, which doesn’t own the city’s debt and didn’t buy. “The forces that have hampered Detroit up until now are still in place.”