SAN DIEGO, May 1 (Reuters) - 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 redevelopment projects.
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.