DETROIT (CBS Detroit) After years of hand wringing over the state of affairs in the rust belt hub that has struggled in recent years perhaps more than any other large city in America, it’s official: Detroit filed for bankruptcy.
Motown, the gritty place that pioneered automobiles, modern manufacturing and soul music, now has the largest municipal bankruptcy case in history.
The 16-page filing was submitted to federal U.S. Bankruptcy Court Thursday afternoon with no announcement from the city or state. Gov. Rick Snyder reportedly plans a Friday morning press conference to go over details of the filing, which requires his signature.
For weeks, emergency manager Kevyn Orr has been working to try to lower the city’s debt as he slashes budgets, works with unions, and make sense of Detroit’s disjointed financial records.
His options were this: File for bankruptcy or cut the biggest bond restructuring deal of all time.
“He’s either going to make inroads or he’s going to provide such a formidable stick (forcing bondholders to restructure) that he’ll be the most hated man in the bond industry,” Hood said.
When he was appointed by Gov. Rick Snyder, Orr gave himself a six-week deadline to get a clear picture of Detroit’s finances and figure out if he can get the city out of its $20 billion debt load.
A plan to avoid bankruptcy would have had to require getting bondholders to agree to debt restructuring. The city has a reported $15 billion in debt, and payments on the $2.9 billion of just general fund debt accounts for about 19 percent of the city’s general fund budget, Orr reported to the state, according to the Huffington Post.
The city only has enough cash to make those payments until December.