San Bernardino Releases Bankruptcy Plan; As Expected, CalPERS Will Be Paid In Full

The writing has been on the wall for some time now. So Thursday’s release of San Bernardino’s bankruptcy plan only confirmed what many already inferred: the city, in a bid to avoid reducing pensions, will continue making full payments to CalPERS.

But the city’s other bondholders won’t be so lucky.

From Reuters:

The Southern California city of San Bernardino wants to repay its pension bondholders just a penny on the dollar while paying the state pension fund Calpers in full under its long-awaited bankruptcy exit plan released on Thursday.

Under the bankruptcy plan, called a plan of adjustment, San Bernardino also intends to virtually eliminate retiree health insurance costs, and outsource its fire, emergency response and trash services.

San Bernardino proposes paying the Luxembourg-based bank EEPK, holder of $50 million in pension obligation bonds and the city’s second largest creditor, a fraction of its original debt, according to the plan, posted on the city’s website.

EEPK, along with Ambac Assurance Corp, which insures a portion of the pension bonds, and Wells Fargo, the bond trustee, have the $50 million principal amount of their debt slashed to just $500,000, or a penny on the dollar, under the bankruptcy plan.

A judge tossed a lawsuit this week from two of the city’s creditors, who argued it wasn’t fair for the city to pay CalPERS in full but pay other creditors pennies on the dollar.

San Bernardino declared bankruptcy in 2012.

Photo by  rocor via Flickr CC License