The move, which was expected, underscores how difficult it will be for Detroit to regain Wall Street’s trust following the city’s Chapter 9 bankruptcy. A lower bond rating may increase the city’s borrowing costs.
Detroit emergency manager Kevyn Orr directed the city to stop making payments on its unsecured bonds after the city filed for bankruptcy July 18.
Fitch’s move to downgrade Detroit from C to D comes as the city approaches an Oct. 1 deadline to make interest payments on $411 million in unlimited tax general obligation bonds and $202.8 million in limited-tax general obligation bonds.
Detroit had already stopped making payments on its $1.5 billion in pension-obligation certificates of participation, although the city continues to make payments on interest-rate swaps that are being treated as secured obligations in court.
