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Fitch: Syracuse Bankruptcy Unlikely, Other Municipal Bankruptcies Uncertain

August 10, 2012, 07:00 AM
Filed Under: Bankruptcy

According to an article posted on the Fitch web site, Fitch believes the city of Syracuse's objective for requesting a legal expert's opinion on municipal bankruptcy is only informational and it is unlikely that the city will pursue bankruptcy in the near future.

The report states that Fitch also expects the number of cities that express an interest in bankruptcy procedures to increase.

Fitch expects other cities to express an interest in bankruptcy procedures more frequently as the fiscal stress drags on and that this presents a challenge to bondholders. Some distressed governments that inquire about bankruptcy will exhibit a modicum of financial flexibility, satisfactory reserves, revenue-raising options, or potential for spending cuts. These should be distinguished from governments that inquire after exhausting options and making public statements conveying the possibility of a bankruptcy filing.

The article also states that Fitch expects informational requests and bankruptcy filings to be less frequent in states that provide intervention mechanisms for local governments. The New York State Financial Control Board, for example, was founded in 1975 and has been effective in helping towns to avoid bankruptcy.

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