Stockton, the bankrupt California city seeking to resolve $1.18 billion in claims, is in the rare position of fighting a creditor in court to win approval of its debt-cutting plan, a dispute that may presage a much larger battle coming to Detroit.
Stockton, California, testing a new state requirement that municipalities try mediation before seeking bankruptcy protection, made formal requests to creditors to take part, according to a lawyer for the city.
Jefferson County, Alabama, officials shouldn’t worry that a bankruptcy filing will damage their ability to borrow money in the future, said lawyers who guided other municipalities through two of the biggest court-supervised restructurings. The markets will forget, they said.
Central Falls, the first city in Rhode Island’s 222-year history to go bankrupt, is preparing to exit court protection after 13 months by keeping bondholders whole while raising taxes and cutting workers and pensions.
Stockton, California, creditors asked a judge to end its bankruptcy case, saying at the start of a four-day trial that the city should cut excessive employee pay and pension benefits before seeking court protection.
Stockton, California, may take the first steps toward becoming the most populous U.S. city to file for bankruptcy next week because of burdensome employee costs, excessive debt and bookkeeping errors that misrepresented accounts, city officials said yesterday.
Removing Stockton, California, from federal bankruptcy protection will require that creditors such as Assured Guaranty Corp. and Franklin Resources Inc. prove the city isn’t truly insolvent, and that its leaders didn’t negotiate a potential settlement in good faith.