Municipal Bankruptcy Still Rare, but No Longer Taboo

Source: Alfred Medioli, Moody’s Investors Service, US Public Finance, Sector In-Depth, August 6, 2015

From the press release:
Municipal bankruptcy, while still a rarity, has become a less unthinkable way for distressed local governments to reduce their debt and pension liabilities, says Moody’s Investors Service in a new report, “Municipal Bankruptcy Still Rare, but No Longer Taboo.” Moody’s notes that our median municipal rating is Aa3, and less than 0.5% of all its rated cities, counties and school districts have speculative grade credit ratings. Any growing willingness to pursue bankruptcy among the lowest-rated issuers in this group would have no impact on the overall distribution of Moody’s municipal ratings. Municipal bankruptcies, however, may be more widely considered as the bankruptcies of Jefferson County, AL, Stockton, CA, and Detroit lay out a potential blueprint other distressed municipalities could follow, with Detroit restructuring and emerging in 16 months.