CORRECTED-Stockton, Calif., insurer contests city bankruptcy

Thu Aug 9, 2012 11:38am EDT

(Corrects unit name to National Public Finance Guarantee Corp)

Aug 9 (Reuters) - A unit of insurer MBIA Inc. challenged Stockton, California's bankruptcy on Wednesday, saying the case was invalid because the city didn't first negotiate with its biggest unsecured creditor, the California Public Employees' Retirement System.

The National Public Finance Guarantee Corp., which insured nearly $94 million of the city's revenue bonds, said the city was required to negotiate in good faith with creditors before filing, according to the objection filed in bankruptcy court. (Reporting by Hilary Russ; Editing by Padraic Cassidy)