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Muni Bond 2 year old possible chapter 9 warning
Old 09-19-2011, 04:37 PM   #1
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Muni Bond 2 year old possible chapter 9 warning

Hi all,
Today, I received an email from Fidelity indicating, "Event Description: POSSIBLE CHAPTER 9 FILING (08/19/09)". This is for a Detroit Michigan school district bond. I called Fidelity and spoke with a fixed income person who indicated that they are not sure why one of the bond analysis companies are sending out old alerts. I guess this is not the only case. He looked up the history and apparently two years ago the school district was contemplating filing chapter 9 and it apparently never happened. I could currently sell my bond for more than I paid for it (over $25k). Part of me wants to sell it since it is Detroit + School district (No offense to any Detroitians out there) - so, why take the risk? And part of me says to keep it since I do not believe I could find another 5% bond (with a 2028 maturity date) with a high rating. Any opinions?
Thanks!
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Old 09-19-2011, 04:47 PM   #2
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Quote:
Originally Posted by Earl E Retyre View Post
Hi all,
Today, I received an email from Fidelity indicating, "Event Description: POSSIBLE CHAPTER 9 FILING (08/19/09)". This is for a Detroit Michigan school district bond. I called Fidelity and spoke with a fixed income person who indicated that they are not sure why one of the bond analysis companies are sending out old alerts. I guess this is not the only case. He looked up the history and apparently two years ago the school district was contemplating filing chapter 9 and it apparently never happened. I could currently sell my bond for more than I paid for it (over $25k). Part of me wants to sell it since it is Detroit + School district (No offense to any Detroitians out there) - so, why take the risk? And part of me says to keep it since I do not believe I could find another 5% bond (with a 2028 maturity date) with a high rating. Any opinions?
Thanks!
[usual boilerplate]. If you can sell it at the price you think, get rid of the thing. Is it any safer than all other possibilities for your proceeds? Not likely.

Ha
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Old 09-21-2011, 12:48 AM   #3
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Originally Posted by Earl E Retyre View Post
Hi all,
"Event Description: POSSIBLE CHAPTER 9 FILING (08/19/09)"................5% bond (with a 2028 maturity date) with a high rating.
There seems to be an oxymoron here. Has the bond been re-rated upward since the issuers were considering the Chapt 9 filing? Or did the rating agencies just ignore the fact that the issuers were considering Chapt 9?
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Old 09-21-2011, 02:43 PM   #4
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I assume the rating is high since the potential Chapter 9 filing was 2 years ago and the filing never happened. But I am surprised as well. Maybe this gives insight into how much weight to put into the ratings. I am glad it is high however. I am going to sell it per haha's suggestion.
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Old 09-21-2011, 11:09 PM   #5
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I don't hold any individual bonds but I get the Fidelity Alerts for somebody's account. Thought I had it fixed about a year ago, but they're back again. Definitely a quality problem with their bond alerts.
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