Quote Originally Posted by Novine View Post
As far as Moody's and others, the downgrades are no different than what happened with the US debt last year.


It's quite a bit different. US debt was downgraded from completely safe to nearly completely safe. Still high-investment grade, as evidenced by it's low yield.

Detroit debt went from low investment grade to junk, triggering swap agreements that it must now cover. This also means that some groups are barred from holding Detroit debt - like some pension funds and municipal investment organizations. It's a big deal.

<quote>It's uncertainty over the process that is causing most of the concerns, not whether the debts that are currently owed will be paid as the city continues to make payments on its current debt obligations. [/QUOTE]

The rating is based SOLELY on the future ability of a debtor to pay. That's what a rating is. The downgrade is an indication that the ratings agencies think that Detroit will be less likely to pay out it's obligations.