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March 25, 2013
What's behind the Stockton, CA bankruptcy?
Last July, Stockton, CA became the largest US city ever to file for bankruptcy. It was being choked to death by pension and health care costs after a series of bad investments in mortgage backed securities blew up during the housing meltdown. But some bond insurers are saying, "Not so fast." These companies stand to lose a bundle in any restructing and are accusing Stockton of misusing the municipal bankruptcy laws. UPI: "The agenda is clear," lawyer Jeffrey Bjork wrote on behalf of the Assured Guaranty Ltd. bond insurer, one of the largest creditors that helped the city refinance pension debt. "The city hopes to use the Chapter 9 plan process to impose permanent impairment, and to cram down a non-consensual plan, on capital-market creditors," he wrote. Bjork called Stockton's July 2012 declaration of Chapter 9 bankruptcy an improper use of the U.S. Bankruptcy Code and asked U.S. Bankruptcy Judge Christopher M. Klein in Sacramento to throw out Stockton's case, arguing the city...(Read Full Post)