SAN DIEGO May 1 The bankrupt California city of
Stockton has reached a settlement with Ambac Assurance Corp over
$13.3 million of city debt the company insures, the trustee for
the debt said on Wednesday.
Wells Fargo Bank NA served as trustee for the city's
certificates of participation, sold by Stockton in 2003 for
Details of the settlement were not provided in the filing by
Wells Fargo with the Municipal Securities Rulemaking Board. The
U.S. judge overseeing the bankruptcy case has already given his
approval to settle the matter.
A city of 300,000 in California's Central Valley, Stockton
is the largest U.S. city to file for Chapter 9 municipal
bankruptcy, a rarity among U.S. local governments.
The city filed last year, triggering concerns that other
financially troubled cities in the most populous U.S. state
would follow its example.
Two other cities, San Bernardino and Mammoth Lakes, filed
for bankruptcy after Stockton. San Bernardino's bankruptcy case
is proceeding while Mammoth Lakes dropped its case.
Early last month the judge in Stockton's case found the city
met eligibility requirements to move forward with its case. That
allows Stockton to craft a plan to adjust its debts. The city
may file the plan with the judge as soon as July.
Stockton's other so-called capital market creditors
challenged the city's eligibility for Chapter 9 bankruptcy
protection in court. They're now in talks with Stockton and are
waiting on the city's restructuring plan.
The other creditors include bond insurers Assured Guaranty
Corp, Assured Guaranty Municipal Corp and National Public
Finance Guarantee Corp. They oppose Stockton's plan to stop bond
payments and force bondholders and bond insurers to swallow
steep losses while the city continues to make pension payments
to the California Public Employees' Retirement System.
Stockton officials say they must maintain pension spending
to retain and recruit employees, adding that city employees have
had pay cut and retired city workers will lose medical coverage
as part of the city's plan to restructure its finances.