Michigan’s Finance Authority plans to sell $92 million of one-year notes backed by state aid for Detroit’s public schools in the first deal tied to the city since it sought bankruptcy protection July 18.
Michigan Governor Rick Snyder’s formal declaration that a financial emergency besets Detroit started the clock ticking for city leaders who may want to try to block a state takeover. It gave them 10 days.
Investors’ insistence on a yield 14 times higher than the AAA benchmark on $92 million of Detroit school notes is the latest example of municipal-bond market contempt for Michigan after the city’s record bankruptcy.
The yield penalty on Michigan’s debt has climbed 40 percent in less than two weeks as defaults by Detroit and two school districts lead investors to question the state’s commitment to protect bondholders.
A delayed bond sale by a Michigan county that’s home to the birthplace of General Motors Co. shows how Detroit’s fiscal distress is penalizing local governments in the eighth-largest U.S. state by population.
Michigan issuers led by a school district west of Detroit plan to sell $28 million of debt next week, after at least three municipalities in the state put off deals following the Motor City’s historic bankruptcy.
Michigan’s Genesee County postponed a $54.2 million bond offer planned for today, a sign that issuers in the state are being penalized two weeks after Detroit filed the nation’s biggest municipal bankruptcy.