Monday, March 12, 2012

Harrisburg, PA to Default on Next 2 Debt Payments

Pennsylvania's capital of Harrisburg will default on its next two debt payments this week totaling $5.3 million.  Holders of the muni debt will supposedly be made whole by Ambac, provided the bond insurer hasn't gotten wise to the CME Group's business model for making good on client losses.

Pennsylvania's distressed capital city, Harrisburg, will skip $5.3 million of debt payments due next week, the first time the city has defaulted on its general obligation bonds, to ensure there is enough cash to fund vital services...

Holders of the affected bonds and notes do have some protection because principal and interest payments are insured by Ambac Assurance Corp., Unkovic said.
So far in 2012, there have been 21 defaults on muni debt totaling $978 million, according to Richard Lehmann, publisher of Distressed Debt Securities Newsletter, who expects the pace of defaults to increase...
Pennsylvania's capital of 50,000 people is mired in $326 million of debt due to the expensive retrofits and repairs of its troubled trash incinerator.
In a sign that Harrisburg's financial crisis was expanding to affect additional types of debt, Unkovic noted that this is the first time the city has defaulted on its general obligation debt. It has previously defaulted on revenue bonds tied to its incinerator project, and continues to not make those payments.
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