Detroit becomes largest US city to file for bankruptcy , #Pensions at risk

Detroit becomes largest US city to file for bankruptcy.

Following decades of mismanagement, Detroit formally filed for bankruptcy yesterday as it found itself sinking under huge debts – becoming the largest US city ever to take such a drastic measure.

The filing sets a new record for municipal bankruptcies, as no other city of Detroit’s size has ever gone bust.

Detroit’s emergency manager, Kevyn Orr, reportedly took the decision after failing to broker a deal between the city’s bondholders and its pension funds.

Orr and the city’s creditors and pensioners will now begin a fraught legal consultation period while a court determines whether the city is eligible for chapter 9 bankruptcy protection for its $18.5 billion debts and liabilities.

In a letter posted with the filing, Michigan Governor Richard Snyder confirmed that he had received Orr’s request to start the bankruptcy proceedings. It was ‘clear that the financial emergency in Detroit cannot be successfully addressed outside of such a filing, and it is the only reasonable alternative that is available’.

“This decision comes in the wake of 60 years of decline in the city, a period in which reality was often ignored”, he wrote.

The White House said it was monitoring the situation, but stopped short of offering any federal aid.

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