logo
Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?

Register
    

 


Traders Get on Waiting List to Profit on Detroit's Bankruptcy

  +Follow July 29, 2013 1:04PM
Share:
Tickers Mentioned:

Once Detroit announced they would be going bankrupt, almost immediately traders began making their bet. The Detroit fallout involves almost $18 billion in debt, backed by insurance holders paying out to bondholders. Detroit is struggling to fund the city’s pension system (an expense that cannot be shuttered) and the city needs to sell bonds in order to do so. And as Detroit scrambles, Wall Street is payign attention, as hedge funds scramble to buy bonds, thus becoming creditors to the beleuagured American metropolis.

It’s a big bet, but many traders thinkdespite teh city's troubles they'll be able to meet their obligations. The rush to capitalize on the bankruptcy is so frenzied that there is currently a long waiting list to buy Detroit municipal bonds.  

The bond issue is further complicated by a refusal of the city to accept a bailout. Emergency city manager Kevyn Orr said “Hope is not a plan” and he has neither asked for nor been offered a bailout. But the desires of bond holders are of no interest to him, nor Governor Rick Snyder. Their only concern is “fixing Detroit.”

If the city defaults, the original bond-holers’ investments will become near worthless. Of special note are $530 million general-obligation bonds, backed by taxpayer money and thus considered safe - that is, if an entire city of taxpayers doesn’t default on them. Snyder brushed off concerns the scrambling bondholders could be left with nothing, noting that the Wall Street bond traders are “sophisticated buyers” who understand risk.

Regardless of risk, the bonds are the hottest bonds on the market right now. The bondholders who have gotten in on the trading believe Orr is being overly pessimistic on the city’s chances to meet their debt obligations.

Bullish investors think the payout will be far higher, citing the fact that cities usually pay back creditrors at a higher rate than corporate defaulters. According to municipal bankruptcy expert Jim Spiotto of Chapman and Chapman, while municipal bankruptcies usually pay out to bondholders better than corporate ones, Detroit could be a special case, because “Detroit has a long history of disappointing people.”If the city does end up paying off its debts though, the debt could be a huge win for bondholders. Orr originally put the return for bondholders at 10 cents on the dollar.

Detroit has agreed to sell 75 cents on the dollar for almost $340 million in secured debt to UBS AG ($UBS) and Bank of America Merrill Lynch (BAC) .

Among many austerity measures the city is considering undertaking to pay back creditors, Detroit has considered restructuring their Sewage and Waste Management system, deferring penrring pension payouts, and even selling the city’s art collection, valued at around $1 billion.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


Liked What You Read? Join Equities.com as a contributor and get eyeballs on your content FOR FREE!

Results for UBS
SB Name
26 May 15 04:39:20
@AspiratedGaming congratulations on 100 $ubs
conkers
26 May 15 03:03:40
.@BBCBusiness First #Libor trial starts in London http://t.co/NL78F8hE88 @Forbes $UBS http://t.co/KYKjTvk9z8 #FX #FOREX .@waynog
CH Finanznachrichten
26 May 15 01:37:27
Neu veröffentlicht: UBS and PWC’s 2015 Billionaires Report explores the creation, preservation and legacy... http://t.co/93XXFUqLmM $UBS
$Stocknewsalerts
26 May 15 01:03:27
$UBS UBS and PWC’s 2015 Billionaires Report explores the creation, preservation and legacy of great wealth a From our Stock News Alerts App
MyAllies Trading
26 May 15 01:03:10
$UBS UBS and PWC’s 2015 Billionaires Report explores the creation, preservation and legacy of great wealth ar... http://t.co/cTlddIODNF
Invest | Donate
25 May 15 23:45:45
@planetoptionews: #UBS to withdraw from Australian wealth #business - http://t.co/lw4zaKuzwW $UBS #banking #inve… http://t.co/bwWskXNrBd
Planet Option
25 May 15 23:25:56
#UBS to withdraw from Australian wealth #business - http://t.co/HvEOe5xyBv $UBS #banking #investment #australia http://t.co/j258XTRvuu
TJ
25 May 15 23:22:48
I need $ubs, $ubtweets, & $tocks
FinSentS Euro 600
25 May 15 23:20:29
$UBS:US First Libor fixing trial starts today with suspect facing 10 years in jail if guilty #UBS AG http://t.co/nJrv5JxWqH #STOXX600
Emotional StressTest
25 May 15 21:00:06
It's not often you hear 'concerns' and 'bailout', used to describe a bank, but when you do it's $UBS: http://t.co/HqTzsRu1FT
BreakingStocksNews
25 May 15 20:32:02
$UBS $UBSN.EB: UBS Withdraws From Australian Wealth-Management Business: http://t.co/6xMY2DC5Nr
Invest | Donate
25 May 15 19:24:41
@FinStd: BREAKING: UBS hands wealth management business to senior staff #ausbiz #investment #advice $UBS http://t.co/8eOP7WOFBu
Financial Standard
25 May 15 19:02:52
BREAKING: UBS hands wealth management business to senior staff #ausbiz #investment #advice $UBS http://t.co/2UaJNv4BzD
υηι¢σяη ναgιηα
25 May 15 16:24:22
Me gustó un video de @YouTube de @weebos_zunder http://t.co/DEirETZYbB Especial millonetis de $ubs (sorteo bonito parte 1)
υηι¢σяη ναgιηα
25 May 15 16:22:31
Me gustó un video de @YouTube de @weebos_zunder http://t.co/Fn7hCrWS6W Especial millonetis de $ubs parte 2 (RESULTADO DEL SORTEO)
TalkMarkets
25 May 15 13:09:02
#Banks Given Record Fines Over #Forex Manipulation $JPM $BCS $C $RBS $BAC $UBS http://t.co/hp1iKNzinZ
binaryoptionsocial
25 May 15 13:04:58
RT RT #Trending companies nearing the end of day. #Investors #MarketData $TWC $EGRX $CHTR $GREK $BCS $UBS $YINN $C… http://t.co/HFvKae1odE
binaryoptionsocial
25 May 15 13:04:57
RT RT RT RT #BankStock Roundup: Litigations Make Headlines; #JPMorgan & #Citi In Focus $JPM $PNC $COF $UBS $BK $BC… http://t.co/HFvKae1odE
binaryoptionsocial
25 May 15 12:48:53
RT #Trending companies nearing the end of day. #Investors #MarketData $TWC $EGRX $CHTR $GREK $BCS $UBS $YINN $CURE… http://t.co/HFvKae1odE
binaryoptionsocial
25 May 15 12:48:53
RT RT RT #BankStock Roundup: Litigations Make Headlines; #JPMorgan & #Citi In Focus $JPM $PNC $COF $UBS $BK $BCS $… http://t.co/HFvKae1odE
Momentum PR
25 May 15 12:43:00
#Trending companies nearing the end of day. #Investors #MarketData $TWC $EGRX $CHTR $GREK $BCS $UBS $YINN $CURE $DISH $OLED $AGU
binaryoptionsocial
25 May 15 12:32:54
RT RT #BankStock Roundup: Litigations Make Headlines; #JPMorgan & #Citi In Focus $JPM $PNC $COF $UBS $BK $BCS $RBS… http://t.co/HFvKae1odE
binaryoptionsocial
25 May 15 12:19:15
RT #BankStock Roundup: Litigations Make Headlines; #JPMorgan & #Citi In Focus $JPM $PNC $COF $UBS $BK $BCS $RBS $C… http://t.co/HFvKae1odE
TalkMarkets
25 May 15 12:09:02
#BankStock Roundup: Litigations Make Headlines; #JPMorgan & #Citi In Focus $JPM $PNC $COF $UBS $BK $BCS $RBS $C $BAC http://t.co/CWW67tutaj
Thudder & Wicks
25 May 15 11:42:40
Deals of the Day: $CHTR Nears Deal to Buy $TWC for $55.1 Billion, $UBS http://t.co/5WcYEy8RHe http://t.co/DUdVqwi93G
ProVesting
25 May 15 08:17:02
$UBS $UBSN.EB: China Nuclear Firm Plans Biggest Domestic IPO in 5 Years: http://t.co/VNtmb26J2w
DD Notes Maker
25 May 15 08:00:02
Due diligence sheets for $WWIO $BGNN $TALK $UBS $SAN $MSFT $NTEK can be found on http://t.co/JPO7bvYPYu
TalkMarkets Recap
25 May 15 07:09:02
#Banks Given Record Fines Over #Forex Manipulation $JPM $BCS $C $RBS $BAC $UBS http://t.co/I9cUatMZy9
Veda Herson
25 May 15 06:45:26
RT @bosocial: RT RT RT #BankStock Roundup: Litigations Make Headlines; #JPMorgan & #Citi In Focus $JPM $PNC $COF $UBS $BK $BCS $… http://t.…
binaryoptionsocial
25 May 15 06:43:07
RT RT RT #BankStock Roundup: Litigations Make Headlines; #JPMorgan & #Citi In Focus $JPM $PNC $COF $UBS $BK $BCS $… http://t.co/HFvKae1odE
binaryoptionsocial
25 May 15 06:26:22
RT RT #BankStock Roundup: Litigations Make Headlines; #JPMorgan & #Citi In Focus $JPM $PNC $COF $UBS $BK $BCS $RBS… http://t.co/HFvKae1odE
binaryoptionsocial
25 May 15 06:11:29
RT #BankStock Roundup: Litigations Make Headlines; #JPMorgan & #Citi In Focus $JPM $PNC $COF $UBS $BK $BCS $RBS $C… http://t.co/HFvKae1odE
TalkMarkets Recap
25 May 15 06:09:02
#BankStock Roundup: Litigations Make Headlines; #JPMorgan & #Citi In Focus $JPM $PNC $COF $UBS $BK $BCS $RBS $C $BAC http://t.co/dWEpbNjNOp
Hotpage News
25 May 15 05:23:54
Warren : BAN Guilty Banks JPMorgan,Citigroup,UBS, RBS & Barclays from Managing Retirement Accounts $JPM $C $UBS $BCS http://t.co/LuLcdB8j0J
Hotpage
25 May 15 05:23:54
Warren : BAN Guilty Banks JPMorgan,Citigroup,UBS, RBS & Barclays from Managing Retirement Accounts $JPM $C $UBS $BCS http://t.co/8kKPCdHNtT
PolgarStocks
25 May 15 03:50:06
UBS UBS AG Yield http://t.co/RiCZrR7ioq $UBS $BBH $AGG $AVGO #UBS #stocks #finance
Rosner Stocks
25 May 15 03:33:19
AEMD Aethion Medical Short Sales http://t.co/DPjflFvv9A $AEMD $DDD $AMLP $UBS #AEMD #investing #stock
Emotional StressTest
25 May 15 02:00:10
'Omission,' 'CONFLICTS,' and 'stressed'... you would think Reuters is trolling $UBS: http://t.co/ThNnZIRjeq
TalkMarkets
25 May 15 01:31:29
#Banks Given Record Fines Over #Forex Manipulation $JPM $BCS $C $RBS $BAC $UBS http://t.co/hp1iKNzinZ
TalkMarkets
24 May 15 23:50:57
#BankStock Roundup: Litigations Make Headlines; #JPMorgan & #Citi In Focus $JPM $PNC $COF $UBS $BK $BCS $RBS $C $BAC http://t.co/CWW67tutaj
Hotpage News
24 May 15 18:14:50
Warren : BAN Guilty Banks JPMorgan,Citigroup,UBS, RBS & Barclays from Managing Retirement Accounts $JPM $C $UBS $BCS http://t.co/LuLcdB8j0J
Hotpage
24 May 15 18:14:50
Warren : BAN Guilty Banks JPMorgan,Citigroup,UBS, RBS & Barclays from Managing Retirement Accounts $JPM $C $UBS $BCS http://t.co/8kKPCdHNtT
Zercatto
24 May 15 05:02:15
UBS's 'Godfather of Leniency' Made One Offer the Fraud Cops Refused @business #invest $UBS http://t.co/1plyhJlmts http://t.co/Qm0kTN4BXd
Zercatto
24 May 15 05:01:56
UBS's 'Godfather of Leniency' Made One Offer the Fraud Cops Refused @business #invest $UBS http://t.co/1plyhJ3LBU
DD Notes Maker
24 May 15 05:00:03
Get the latest DD for $UBS $GNGR $AERO $ADGL $TLFX $GRMC $SPBU check it out on http://t.co/SKt55wP3p9
WKRB News
23 May 15 07:19:35
UBS AG Receives $31.25 Consensus Price Target from Analysts $UBS http://t.co/v40IntZ6LO
ProTradersNews
23 May 15 07:18:03
$UBS: UBS AG Receives $31.25 Consensus Price Target from Analysts ...: http://t.co/kH74t5RcK4
StockNewsWires
22 May 15 15:57:13
$UBS: 5 Banks Agree To Plead Guilty: http://t.co/X18A28N236
FinSentS Euro 600
22 May 15 15:28:32
$UBS:US The Leniency ProcessDidn't Work Out So Well for UBS #UBS AG http://t.co/k3YekUS9kP #STOXX600
publio magri
22 May 15 12:01:02
RT @valuewalk: Banks Hit With Record Fines For Forex Manipulation [Chart] http://t.co/OcXWD0k57L $C $JPM $BCS $UBS http://t.co/Ubv1kOdnn7
				
				
  +Follow July 29, 2013 1:04PM
Share:

Comments

 

blog comments powered by Disqus

About us

Equities.com is the most advanced interactive online social ecosystem for the financial industry, serving as a resource center and next-generation communication platform that connects self-directed investors with public issuers, market experts, and professional service providers and vendors. Registered members can leverage our exclusive proprietary research tools such as the Small-Cap Stars, which outperformed 90% of all small-cap mutual funds, and robust do-it-yourself E.V.A. research reports. The Equities.com Issuer Dashboard is the ideal tool to communicate and manage investor awareness campaigns to the investment community, as well as to access valuable resources to help your company grow.

Market Data powered by QuoteMedia.
Copyright © QuoteMedia. Data delayed 15 minutes unless otherwise indicated. Terms of Use.

Login or Register

LOG IN