| RIVERSIDE, Calif.
RIVERSIDE, Calif. Aug 14 San Bernardino,
California, has begun face-to-face talks with some of its
biggest creditors - bondholders and insurers - for the first
time, two years after filing for bankruptcy in a case that has
slowed to a crawl in the past 12 months.
Paul Glassman, an attorney representing the city, said in a
court hearing on Thursday that an all-day mediation session was
held on Aug. 5 with Ambac Assurance Corp, the insurer of $50
million of pension obligation bonds issued to the city in 2005.
Ambac was also negotiating on behalf of Erste Europäische
Pfandbrief-und Kommunalkreditbank AG, the holder of the bonds,
and Wells Fargo Bank, the bond trustee and the flagship bank of
Wells Fargo & Co. Details of the negotiations are
subject to a judicial gag order.
Glassman said the city will begin talks soon with another
creditor, bond insurer National Public Finance Guarantee Corp, a
unit of MBIA Inc.
San Bernardino, a city of 205,000 people located 65 miles
east of Los Angeles, filed for bankruptcy in August 2012 with a
budget deficit of $45 million.
The city is one of a handful of municipal bankruptcies being
closely watched by the $3.7 trillion U.S. municipal bond market.
Bondholders, public employees and other state and local
governments are keen on understanding how financially distressed
cities handle their debts to Wall Street, compared with other
creditors like large pension funds such as Calpers, during
Chapter 9 protection.
Stockton, another California city that declared bankruptcy
around the same time as San Bernardino, is significantly closer
to exiting Chapter 9. Detroit, Michigan, which filed the biggest
municipal bankruptcy in U.S. history in July 2013, filed a plan
of adjustment to deal with its $18 billion of debt in February.
'TENTATIVE' POLICE PACT
San Bernardino has also reached a "tentative" deal with the
police union - the city's biggest - after months of closed-door
negotiations, Glassman said. He added that the deal represented
"significant progress" in the city's attempt to issue a
bankruptcy exit plan, known as a plan of adjustment.
In June, the city reached a deal with its biggest creditor,
the California Public Employees' Retirement System (Calpers).
San Bernardino has imposed significant cuts in pay and other
benefits on its police and firefighters.
While the police have now reached a deal with city leaders -
details are also subject to a judicial gag order - the
firefighters have not.
A request by the firefighters' union to impose a January
deadline on the city to issue a plan to exit bankruptcy was
rejected by U.S. Bankruptcy Court Judge Meredith Jury, who is
overseeing the case.
Mark Angelov, an attorney for Ambac, said no progress was
made in the mediation session, adding that "the case has been
going on a long time. If there continues to be no progress, we
may well ask for a deadline for the city to file a plan."
(Reporting by Tim Reid; Editing by Jan Paschal)