Detroit (9845MF) became the most populous U.S. city to file for bankruptcy, seeking court protection from creditors while it tries to eliminate a budget deficit and cut long-term debt.
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Michigan’s largest city has seen its population decline to 707,000, down 7 percent since 2010, according to U.S. Census data. Median household income was less than $28,000, compared with $49,000 statewide, and more than 36 percent of residents lived in poverty as of 2011, Census data show. The median home value of $71,000 was barely half the $137,000 value statewide.The city listed assets and debt of more than $1 billion in a Chapter 9 petition filed today in court in Detroit. Chapter 9 of the U.S. Bankruptcy Code is reserved for municipalities and differs from the rules used by bankrupt companies in Chapter 11.
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Among the biggest drains on the city’s general fund, which pays for police, fire and other basic services, are health benefits paid to 18,500 retired city workers, mostly former police and firefighters, according to Orr’s May report. Without changes, the city will pay $163 million for retiree health-care costs in the next fiscal year, which starts July 1, the report found.
Among the points [Michigan Governor Rick Snyder] cited:
- Citizens wait an average 58 minutes for police to respond, and just 8.7 per cent of cases are solved. “The city’s police cars, fire trucks and ambulances are so old that breakdowns make it impossible to keep up the fleet or properly carry out their roles.”
- Only one-third of the city’s ambulances were in service in the first quarter.
- Some 40 per cent of the street lights were dead in the first three months of the year.
- “Large swathes of largely abandoned structures,” some 78,000, are creating public safety problems.
- The city has more than $18-billion in financial obligations, and even if it could raise taxes, the people can’t afford to pay them.
Big news! The new regime for insurers is on its way!
Global insurers identified as too big to fail will have to hold higher reserves and draw up recovery and resolution plans to limit the economic fallout should they go bust, the industry’s watchdog said.
The International Association of Insurance Supervisors, which collected data from 50 insurers in 14 jurisdictions, including the U.S., to help the Financial Stability Board draw up a list of systemically important firms, released its assessment methodology and policy measures today. The list of insurers will be announced by the Basel, Switzerland-based FSB in coming days.
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“Since the financial crisis, supervisors across the sector have worked diligently to address risks to the global financial system from systemically important financial institutions,” Peter Braumueller, chair of the IAIS executive committee, said in a statement. “The measures and framework put forward by the IAIS today complete a major piece of this reform in a manner specifically designed for the insurance sector.”The companies on the FSB insurer list will be included based on criteria such as size, global activity and the amount of non-insurance businesses they have. The designation of systemically important means the failure of the company could threaten the financial system.
The IAIS would impose tougher capital standards on the systemically important insurers to increase their capacity to absorb losses and require them to design recovery and resolution plans to meet cases of severe financial distress. The FSB said in June it will follow up next year with a list of too-big-to-fail reinsurers.
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The IAIS said non-traditional activities, including alternative risk transfers such as insurance-linked securities and financial guarantee insurance, as well as capital-markets businesses, banking, third-party asset management and industrial activities, are deemed the most risky and are the most important categories for assessing the systemic importance of an insurer. The firm’s interconnectedness was the next most significant consideration, the watchdog said.The IAIS has said that traditional insurance and reinsurance are unlikely to cause or amplify systemic risk.
The list of GSIIs has been released:
Allianz SE
American International Group, Inc.
Assicurazioni Generali S.p.A.
Aviva plc
Axa S.A.
MetLife, Inc.
Ping An Insurance (Group) Company of China, Ltd.
Prudential Financial, Inc.
Prudential plc
It was a down day for the Canadian preferred share market, with PerpetualDiscounts losing 14bp, FixedResets off 1bp and DeemedRetractibles down 8bp. Volatility was low. Volume was high.
PerpetualDiscounts now yield 5.34%, equivalent to 6.94% interest at the standard equivalency factor of 1.3x. Long Corporates now yield about 4.6%, so the pre-tax interest-equivalent spread is now about 235bp, a small (and perhaps spurious) narrowing from the 240bp reported July 10.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2329 % | 2,577.0 |
| FixedFloater | 4.16 % | 3.44 % | 39,520 | 18.51 | 1 | 0.8830 % | 3,994.0 |
| Floater | 2.72 % | 2.91 % | 87,859 | 19.95 | 4 | -0.2329 % | 2,782.4 |
| OpRet | 4.59 % | 2.75 % | 74,239 | 0.69 | 3 | 0.1148 % | 2,631.1 |
| SplitShare | 4.66 % | 4.41 % | 59,450 | 3.93 | 6 | -0.0331 % | 2,972.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1148 % | 2,405.9 |
| Perpetual-Premium | 5.59 % | 4.31 % | 101,411 | 0.59 | 12 | 0.1485 % | 2,293.7 |
| Perpetual-Discount | 5.32 % | 5.34 % | 139,036 | 14.83 | 26 | -0.1418 % | 2,420.1 |
| FixedReset | 4.95 % | 3.55 % | 238,138 | 3.86 | 84 | -0.0114 % | 2,482.0 |
| Deemed-Retractible | 5.05 % | 4.48 % | 194,944 | 6.89 | 43 | -0.0750 % | 2,389.8 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| W.PR.J | Perpetual-Discount | -1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-18 Maturity Price : 24.25 Evaluated at bid price : 24.55 Bid-YTW : 5.73 % |
| TRP.PR.B | FixedReset | 1.50 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-18 Maturity Price : 23.30 Evaluated at bid price : 23.64 Bid-YTW : 3.26 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| FTS.PR.K | FixedReset | 334,167 | New issue settled today. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-18 Maturity Price : 23.14 Evaluated at bid price : 25.03 Bid-YTW : 3.71 % |
| SLF.PR.H | FixedReset | 191,001 | Scotia sold 59,800 to National at 25.20, then crossed two blocks of 60,000 each at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.12 Bid-YTW : 3.82 % |
| RY.PR.X | FixedReset | 130,203 | Scotia crossed blocks of 100,000 and 23,600, both at 26.31. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-24 Maturity Price : 25.00 Evaluated at bid price : 26.27 Bid-YTW : 2.44 % |
| BAM.PF.D | Perpetual-Discount | 98,950 | Added to TXPR. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-18 Maturity Price : 22.80 Evaluated at bid price : 23.16 Bid-YTW : 5.34 % |
| BMO.PR.J | Deemed-Retractible | 72,037 | RBC crossed blocks of 35,300 and 15,000, both at 25.30. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 4.48 % |
| RY.PR.D | Deemed-Retractible | 62,820 | Added to TXPR. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.35 Bid-YTW : 4.42 % |
| There were 58 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BNS.PR.A | FixedReset | Quote: 26.12 – 26.48 Spot Rate : 0.3600 Average : 0.2250 YTW SCENARIO |
| FTS.PR.J | Perpetual-Discount | Quote: 23.34 – 23.68 Spot Rate : 0.3400 Average : 0.2411 YTW SCENARIO |
| PWF.PR.R | Perpetual-Discount | Quote: 25.10 – 25.39 Spot Rate : 0.2900 Average : 0.2032 YTW SCENARIO |
| ELF.PR.G | Perpetual-Discount | Quote: 22.54 – 22.80 Spot Rate : 0.2600 Average : 0.1918 YTW SCENARIO |
| SLF.PR.G | FixedReset | Quote: 24.25 – 24.42 Spot Rate : 0.1700 Average : 0.1073 YTW SCENARIO |
| IGM.PR.B | Perpetual-Premium | Quote: 25.38 – 25.59 Spot Rate : 0.2100 Average : 0.1501 YTW SCENARIO |
[…] PerpetualDiscounts now yield 5.35%, equivalent to 6.96% interest at the standard conversion factor of 1.3x. Long corporates now yield about 4.6%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 235bp, unchanged from July 18. […]