Judge rules Stockton can file for bankruptcy
Source: The Record (Stockton, CA)
The city of Stockton is eligible for bankruptcy protection, a federal judge ruled today, saying the city was in fact broke and negotiated with its creditors in good faith before asking for Chapter 9 protection last year.
The ruling marks Stockton's first major hurdle in bankruptcy. The city must next win the judge's approval of a plan of adjustment, restructuring millions of dollars worth of debt held by Wall Street creditors, who have so far fought the city's bankruptcy.
Stockton filed bankruptcy June 28 -- nine months ago -- making it the nation's largest city to seek bankruptcy protection.
U.S. Bankruptcy Judge Christopher Klein heard three days of testimony and arguments last week. In a hearing lasting nearly two hours today, he explained the legal reasons for ordering Stockton's eligibility.
Read more: http://www.recordnet.com/apps/pbcs.dll/article?AID=/20130401/A_NEWS/130409992
Newsjock
(11,733 posts)... In a blistering critique, the judge assailed major Wall Street bondholders, Assured Guarantee Corporation and National Public Finance Guaranty Corp., for acting in a heavy-handed manner by refusing to negotiate the city's bond debt unless Stockton took actions to cut its massive employee pension obligations.
Klein concluded that National Public Finance and Assured "each took the position that there was nothing to talk about" unless the city sought concessions from the California State Employees Retirement System, to which it was paying $29 million a year. The city and CalPERS argued that pension costs had to be met.
... The judge ruled that Stockton had put forth a reasoned effort to resolve its massive fiscal debt but received "nothing but a stonewall on the other side."
He also chastised the city's creditors for refusing to pay their required share of costs of pre-bankruptcy mediation, declaring, "The capital market creditors did not negotiate in good faith. And therefore, they do not have the ability to complain."
Paul E Ester
(952 posts)The creditors who challenged Stockton's bankruptcy petition are the bond insurers who guaranteed $165 million in loans the city secured in 2007 to pay its contributions to the CalPERS pension fund. That debt got out of hand as property tax values plummeted during the recession, and money to pay the pension obligation fell short.
Legal observers expect the creditors to aggressively challenge Stockton's repayment plan in the next phase of the process.
By 2009 Stockton had accumulated nearly $1 billion in debt on civic improvements, money owed to pay pension contributions, and the most generous health care benefit in the state coverage for life for all retirees plus a dependent, no matter how long they had worked for the city.
quadrature
(2,049 posts)city cops --> sheriff
most people won't notice any diff, except for a lower tax bill
Macoy51
(239 posts)Let the Wall Street bankers take the hit. They bet on making a nice profit off of the bonds, and lost. Nothing personal, that jsut the way the free market works. You invest and take your chances.
Macoy