Detroit credit rating upgraded 2 notches by Moody's, now investment grade

[Lowell]

Great news for the City of Detroit on its long road back from bankruptcy. Duggan hands out bottles of black ink.

"Moody's Investors Service upgraded Detroit's bond rating by two notches, bringing the city to a level it has not reached since 2009, before it filed for bankruptcy.

"Detroit's bond rating has now reached investment grade. A double upgrade is rare, Mayor Mike Duggan said at a Monday announcement celebrating alongside dozens of department heads. Higher ratings mean governments pay lower costs to borrow money for various investments and upgrades across the city.

"Duggan praised Detroit's chief financial officers from the last decade, budget directors, City Council and city departments that managed with financial constraints. The mayor passed out bottles of black ink to symbolize Detroit's return to investment grade credit rating, getting the city out of "red ink," which signifies financial losses."

https://www.freep.com/story/news/loc...y/73090234007/

[401don]

I don't have too much knowledge in this area but does a better credit rating allow for any existing debt to be refinanced?

[Richard]

No,it works like our credit score system.

Low grade higher risk,higher interest rates.

Investment grade means low risk with the high probability that the city can pay it back in the future,so when they offer bonds it becomes a competitive market and the one’s looking to collect the cheapest interest rates win.

In the cities case that translates into the cities ability to borrow in the future while saving millions of taxpayer dollars in interest.

Bonds are for specific projects,like for instance when they sold bonds to fix the street lights,you cannot go back and have another sale for that and get a cheaper interest rate.

Not to shabby considering the bankruptcy was not to long ago,there are some cities that never reach that level.

Even if you could refinance it you would not want to because then nobody would take that risk again in bad times.

There is a way but you have to be close to the 10 year call date and there are lots of economical issues to take into consideration as a city and time frame that was set in the original offering.

You can invest $5k for 10 years @ 5% and the city pays you $250 per year and then the $5k back at the end of the 10 years. As an example.

Better and higher interest than the bank,and in Detroits case low risk.

But a bond that gets a higher rate is more desirable,so if you want to refinance it at a lower rate it will have less value and less interest to buyers.

I am into them because you can do your own research on a particular city to see where it has been and where it is going,verses playing the stock market,munis are for infrastructure only so you are kinda competing with the feds and their free money but it is safe and low risk.

So to your question,you can refinance but very rarely is it advisable.

I said no at the start because Detroit is not there yet,you have to be very solid financially with the money to burn and not worried about burning bridges,Detroit did default in 2013,so she is still building up her credit score and getting rid of that “bad taste “ left over from the default.


It’s way more complicated then what I posted,but that is kinda the gist of it.

The muni market holds between 2-3 trillion in cities infrastructure debt,actually at a cheaper rate to the taxpayers,paid off quicker then passing a 1 trillion dollar infrastructure bill that’s going to take 30 years to pay off.

It’s cheaper and builds a stronger city if individual taxpayers actually invested in their own cities and bought their own munis.

[Satiricalivory]

This is a pretty big deal and an objective signal of the city's resurgence.

[mwilbert]

I don't have too much knowledge in this area but does a better credit rating allow for any existing debt to be refinanced?

Not in general. The market price of the existing debt presumably will already have risen as the credit quality of the issuer improved, so it will tend to be just as expensive as the new debt, so there would be no benefit to paying it off by issuing new debt. It's the owner of the existing debt who gets the benefit of the improvement in the borrowers credit, not the issuer of that debt.

Some debt is "callable", which means that it has terms that allow the borrower to repay the debt early, usually at a modest premium. If your credit rating has gone up substantially, or if interest rates have fallen for other reasons, so that the old debt has a significantly higher interest rate than new debt, it can be a good idea to pay off the old expensive debt, refinancing it with new cheaper debt.