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A federal judge has approved Stockton's bankruptcy application. This may provide a valuable model for Detroit on how a large city bankruptcy will proceed i.e. who gets paid., as well as providing some cover for the acceptance of such action. Stockton has a pop. of 300,000 and long-term retirement debt of 900 million.
http://www.google.ca/url?sa=t&rct=j&...fG0nYE7xPrzj7w
[Post corrected by Admin to replace Sacramento with Stockton]
You got the link right, but Stockton is at least a couple hundred miles from Sacramento.
To borrow California-speak this has to be the equivalent of a 6.0 quake in the bondholder world - mild damage but not deadly to it. Detroit going down could be something in the 7's. Those boring but cozy, secure interest-bearing municipal bonds could get toxic quickly.
Thanks for fixing the brain cramp Lowell! I was actually listening to sports radio when I read the Stockton story. They were discussing how Sacremento has the worst attendance in the league and doesn't deserve to keep the team. The other guy stated that there's still more people in the building than Detroit, where they have padded their attendance to reach 3rd worst in the league. How the mighty have fallen.
Actually Stockton is about 40 miles south of Sacramento.
Sacramento, until the last year or so had some of the best attendance in the league - they probably have the worst owners though.
It is relevant because the judge acknowledged that Stockton was justified in going into bankruptcy, and assuming whoever got the case involving Detroit used a similar standard, it seems likely Detroit would also be justified.Quote:
Originally Posted by 401don
In other respects, the issues are quite different, in particular it doesn't look to me as if the issues regarding the pensions are really very similar, so I'm not sure how much we will learn from this case. My impression is that in a municipal bankruptcy the way the law is written makes the outcome quite dependent upon how that particular judge sees the case.
What the judge determined was that during the lead up to bankruptcy, the EM time, Stockton's creditors did not negotiate in good faith.
that means the creditors were caught dealing from the bottom of the deck during reorganization.
now, instead of getting maybe .50 cents on their dollar they are heading into single digits.
the result? Creditors had better come to negotiations with plans for a severe hair cut, otherwise they will get scalped.