Judge Rejects Lawsuit Brought By San Bernardino Bondholders

A California bankruptcy judge this week threw out a lawsuit brought by two San Bernardino creditors, who sued the city for continuing to make full payments to CalPERS while paying pennies on the dollar to many other creditors.

San Bernardino declared bankruptcy in 2012.

From the Sacramento Bee:

Ruling from Riverside, U.S. Bankruptcy Judge Meredith Jury tossed the claim filed by the two creditors, Ambac Assurance Corp. and a Luxembourg bank named EEPK.

Last fall the city, which filed for bankruptcy protection in 2012, said it would pay its $24 million-a-year CalPERS bill in full. Ambac and EEPK said that arrangement was unfair to other creditors. Although San Bernardino hasn’t filed its complete repayment plan, it’s likely that many creditors would stand to receive only a portion of what they’re owed.

Ambac and EEPK are owed a total of more than $59 million in the San Bernardino bankruptcy. Lawyers for the two creditors couldn’t be reached for comment.

CalPERS welcomed the ruling.

“The judge in this case has ruled appropriately,” said the California Public Employees’ Retirement System in a prepared statement. “Now the city can turn its attention to the more pressing matter of completing its plan of adjustment for exiting bankruptcy.”

During its bankruptcy proceedings, San Bernardino was given the option to reduce its payments to CalPERS. But the city opted to keep paying the pension fund in full to avoid the reduction of benefits for the city’s public workers.

Photo by  Pete Zarria via Flickr CC License