Nov 8 (Reuters) - Two insurance companies that guaranteedpayments on Detroit's voter-approved general obligation bondssued the city in U.S. Bankruptcy Court on Friday over its Oct. 1default on payments due bondholders.
National Public Finance Guarantee Corporation, the publicfinance subsidiary of MBIA Inc, and Assured GuarantyMunicipal Corp claimed that the city's use of propertytaxes levied exclusively to pay off the bonds for operatingexpenses violated Michigan law.
The insurers asked U.S. Bankruptcy Judge Steven Rhodes, who is currently determining whether Detroit is eligible for themunicipal bankruptcy it filed in July, to force the city to setaside the tax money for bond payments. They also want to makesure that tax money that had been earmarked for payment of thebonds would not be tapped for Detroit's proposed $350 milliondebtor-in-possession financing with Barclays PLC.