Detroit files for bankruptcy, US hedge funds challenge Billabong: Midday Roundup

The US city of Detroit filed for bankruptcy overnight, becoming the largest city in American history to be bankrupt.

The filing has been anticipated for a number of months now, coming as a result of a steadily decreasing population and declining revenues in local businesses.

Governor Rick Snyder says filing for bankruptcy is the “only feasible path” offering a way out.

How Detroit intends to recover from its economic losses remains unclear, but it could signal a possible selling of assets as some basic services have already been reduced.

Between 2000 and 2010, Detroit lost more than a quarter of a million residents as much of the middle-class, who were employed predominately in manufacturing industries, moved to more viable cities after the GFC.

In the 1950s, Detroit was a bustling city with a population of 1.8 million people. Today, its population is only 700,000.

US hedge funds challenge Billabong

US hedge funds Canterbridge Partners and Oaktree Capital have initiated a challenge with the Takeovers Panel regarding Billabong’s debt-for-equity deal with Altamont Capital Partners.

The two groups argue the deal is anti-competitive and coercive. They also argue their deal would result in Billabong having $100 million of debt compared to $300 million under Altamont’s plan.

In a statement to the Australian Securities Exchange, Billabong said the rival proposal was “subject to conditions, a number of which are incapable of satisfaction, and others which would make any refinancing far less certain than under the Altamont Consortium transactions”.

Shares open lower

Aussie shares have dropped this morning, despite analysts predicting it would open higher on the back of Wall Street gains.

The S&P/ASX200 benchmark was down 29.3 points to 4964.1 just before midday.

The materials sector was down 170.5 points to 9,026.2, with Rio Tinto down $1.15 to $55.55 and BHP Billiton losing $0.55 to $33.70.

The Australian dollar was trading at US 91.68 cents.