Shortly after the closing arguments in the Detroit bankruptcy, Stockton’s Bankruptcy plan was approved.
U.S. Bankruptcy Judge Christopher Klein issued a ruling on Oct. 30, which approved a restructuring plan proposed by Stockton, California, according to the Associated Press. The city will be allowed to reorganize over $900 million in long-term debt as a part of Stockton’s bankruptcy plan. With this ruling the city can emerge from the past two years of financial uncertainty following its decision to file for protection under Chapter 9 of the bankruptcy law in 2012.
“This plan, I’m persuaded, is the best that can be done in terms of restructuring an adjustment of the debts of the city of Stockton,” Klein said, according to the news source.
In a landmark ruling earlier in October, Klein also ruled that the city’s pensions could be reduced in municipal bankruptcy, according to Reuters. This opened the door for negotiations between the city and the California Public Employees’ Retirement System, or Calpers, though the city expressed its opposition to the idea.
At times during the bankruptcy, Klein referred to the issue of the pensions as “a festering sore,” that required the court “to get in there and excise it and figure out what the story is,” according to the news source.
The city opted not to negotiate with Calpers, but reached deals with all major creditors except Franklin Templeton Investments, The Associated Press reported. The firm argued that it was being treated unfairly in the ructuring plan, which doesn’t touch the pension fund but asks it to walk away from almost $32.5 million.
“Obviously we are disappointed,” Franklin Templeton’s attorney, James Johnston, told the judge, according to Reuters. “We will evaluate our next steps.”
The city of Stockton’s future looked bright just before the recession, as legislators approved millions for revitalizing downtown areas and other projects. During the recession, however, much of that financed real estate lost value, contributing to a fiscal disaster.
Get the full story of Stockton’s Bankruptcy Plan from my previous posts:
Fitch: Stockton Bankruptcy Likely To Affect Future Municipal Bankruptcy Negotiations
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