(Adds details on ruling, background on case, byline)
By Robin Respaut
SACRAMENTO, Calif., July 8 The judge in
Stockton, California's bankruptcy on Tuesday ruled that the city
has collateral worth $4.052 million with which it could pay
holdout creditor Franklin Templeton, dismissing the city's
contention its collateral was worthless.
At the same time, U.S. Bankruptcy Judge Christopher
Klein said he would make no ruling on Tuesday on whether the
California Public Employees' Retirement System, or Calpers,
should be made to accept less than the entire amount it is owed
while bondholders take losses in the case.
Klein's ruling on the collateral in the case of Stockton,
which filed for bankruptcy in June 2012, followed a trial that
concluded last month and centered around Franklin's objection to
the city proposing to repay it less than a penny on the dollar
for a debt of about $36 million.
The city's collateral against bonds held by Franklin
includes two golf courses, a community center and a park, which
the city had estimated had no value while Franklin had pegged
their value at $6.12 million to $17.34 million.
"Of course one of the problems with appraisals is everyone
comes in with an appraisal that supports their position," Klein
said from the bench on Tuesday. "Judges have long figured out
that they need to be skeptical with their opinions."
Meanwhile, Klein said he wanted "share some of my pain
thinking through the Calpers problem," but said he would not
rule on the matter on Tuesday.
The question of how Calpers, the largest U.S. pension fund,
should be treated is of keen interest for investors and bond
issuers in the $3.7 trillion U.S. municipal bond market.
The treatment of pension systems has been uneven in the
handful of recent municipal bankruptcy cases.
In the case of Detroit, the largest-ever Chapter 9
insolvency case that will go to trial later this summer, the
city has proposed that city pension funds share some of the
But in Vallejo, California, which emerged from bankruptcy in
2011, Calpers was left whole.
(Reporting by Robin Respaut; Writing by Dan Burns; editing by