ABSTRACT
This chapter reviews the concept of default, and then examines the structure of a technical default and its workout. It examines a default according to the situational analysis suggested by Moody's Investors Service. Unlike the Washington Public Power Supply System (WPPSS) default, in which a workout was unsuccessful, the chapter examines the successful uses of the workout to resolve a municipal default. Default is often viewed as a single distinct occasion involving nonpayment of a financial obligation. Debt defaults are the culmination of legal, economic, political, managerial, and financial problems. Midwestern city's recycle energy system (RES) was designed to dispose of 1,000 tons of garbage and trash per day by shredding, removing ferrous materials for sale, and burning the residue to produce steam for sale as a source of energy. During the first phase of default workout, the RES operated under a revenue maximization concept. This economic premise emerged out of the trustee's assumption of control following the technical default.
