Michigan Council 25 of the American Federation of State, County and Municipal Employees filed a notice that it would appeal the decision on Tuesday, as did The General Retirement System of the City of Detroit and the Police and Fire Retirement System of the City of Detroit.

"We're disappointed; we think it's devastating for the retirees," AFSCME counsel Sharon Levine said of the judge's decision. "Unlike in a private company, there is no Pension Benefit Guaranty to protect the retirees. So our retirees, who on average earn $19,000 per year and who run the risk of losing a substantial amount of their pensions, have no safety net," TheDeal's Kelsey Butler reported.

Detroit emergency manager Kevyn Orr said on Tuesday: "We are pleased with Judge Rhodes' decision today, and we will continue to press ahead with the ongoing revitalization of Detroit. We look forward to working with all our creditors, pension funds, unions and lenders to achieve a consensual agreement on a restructuring plan that balances their financial recoveries with the very real needs of the 700,000 citizens of Detroit."

Shares MBIA and Assured Guaranty were little changed on Tuesday, reflecting Palmer of BTIG's belief that " investors have already accounted for the impact of the bankruptcy."

--Written by Antoine Gara in New York

Follow @antoineGara

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