The bond insurer for the city of Stockton has filed a fascinating new objection to the city's bankruptcy filing, arguing that Stockton isn't really bankrupt. Rather, explains Assured Guaranty, the city has purposefully chosen to protect the massive compensation paid to its public employees and decided to stiff bondholders for the city's pension-obligation bonds instead. As Assured told the court, "[T]he city hopes to use the Chapter 9 plan process to cram down a nonconsensual plan on capital market creditors in order to free up cash to fund above-market labor and pension costs, while refusing to consider -- much less implement -- additional sources of revenue and much-needed expenditure reductions." This editorial in the Orange County Register makes this key point: "Eventually the bill will come due. Unfortunately, officials in Stockton, Vallejo and Sacramento won't do the right thing as long as they find other suckers -- whether creditors or taxpayers -- to foot the bill."
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52 Vanderbilt Avenue, New York, N.Y. 10017
phone (212) 599-7000 / fax (212) 599-3494
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