Judge: City of Stockton Eligible for Chapter 9 Bankruptcy
Published On : 4/2/2013 9:01 AM
From : CCN
Categories : Local, State
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Stockton is now the largest city in the nation to enter Chapter 9 bankruptcy protection. As Ben Adler reports from Sacramento, MONDAY’s federal court ruling that the city is eligible for bankruptcy sets the stage for a fresh round of negotiations with its creditors.
The judge agreed with just about every argument Stockton made – that the city was truly fiscally insolvent, and that it had negotiated in good faith.
“There’s nothing to celebrate about bankruptcy. But there’s a certain sense of vindication.”
Vindication, says City Manager Bob Deis, because Stockton’s Wall Street Creditors had argued that the city had not negotiated in good faith. In fact, Judge Christopher Klein said it was the creditors who didn’t negotiate in good faith. Now, says Deis, it’s time for a new round of talks.
(The) city of Stockton makes deals. We negotiate. We’ve already negotiated 10 deals. We’ve got a handful more, and we look forward to that opportunity.”
This case was closely watched because of its potential implications on government pension payments. The creditors argued it wasn’t fair for Stockton to reduce its bond debt to pennies on the dollar while maintaining its CalPERS payments in full. The judge said that’s not a reason to keep Stockton out of bankruptcy, but he added, quote: “This does not mean there’s not potentially a serious issue involving CalPERS.”
The city hopes to negotiate a plan to exit bankruptcy in the next few months.