Fitch Ratings agency has warned it may dramatically downgrade its ratings for Detroit Water & Sewerage bonds if Emergency Manager Kevyn Orr’s reorganization plan for the department goes into effect.In an analysis dated Friday, Fitch warned that it might downgrade $5.7 billion of the city’s water and sewer debt to as low as D -- junk status -- from its current much higher ratings of BB-plus and BB if U.S. Bankruptcy Court Judge Steven Rhodes approves the city’s plan of adjustment as Orr has proposed it.
.....“Fitch believes that there is no legal basis to compel bondholders to accept such impairment as proposed,” Fitch analyst Adrienne M. Booker wrote in the report.
.....And if agencies like Fitch were to downgrade the water department debt to junk status, it would cost the water system more to borrow money for future needs because lower ratings translate into higher interest costs for borrowers.
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