BLOOMBERG: Bondholders shouldn’t panic, because suspended payments don’t necessarily mean they will be forced to take principal reductions, said James Spiotto, a partner with Chapman & Cutler LLP, a law firm in Chicago.
In 1975, New York City suspended payments on debt. After a lawsuit, negotiations and state and federal aid, creditors were fully repaid, he said.
“The devil is in the dialogue,” Spiotto said, referring to coming negotiations between Orr and Detroit creditors.
Investors holding insured debt may also be paid in full. Assured Guaranty Ltd. (AGO) is “committed to honoring its unconditional and irrevocable guaranty,” Ashweeta Durani, a spokeswoman for the insurer, said in a statement. National Public Finance Guarantee Corp. will ensure that policyholders get timely principal and interest payments, Kevin Brown, a spokesman, said in a statement… (more)
