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Harbinger Of Muni Bloodbath: Vallejo Offers Unsecured Creditors 5 - 20 Cent Recovery
But, but, munis always pay back almost 100 cents on the dollar, even in bankruptcy, right? Wrong. Bankrupt Vallejo just filed a POR to pay back unsecured creditors between 5 and 20 cents. "The city regrets that it cannot pay a higher percentage,” Vallejo officials said in the court filings. “The city lacks the revenues to do so while maintaining an adequate level of municipal services, such as the provision of fire and police protection and the repairing of the city’s streets." Just wait for the reaction when holders of unsecured debt all those other (hundreds of) insolvent cities, towns, and states realize that a 5 cent recovery is all too possible...
And now for the bad news, from Bond Buyer:
Unsecured creditors will receive 5 cents to 20 cents on the dollar for their claims under a reorganization plan Vallejo, Calif., filed Tuesday in federal court.
The plan to exit bankruptcy outlines the reorganization of debt the city owes its largest creditors, Union Bank and National Public Finance Guarantee. It also sets aside a pool of $6 million to pay unsecured creditors about 5% to 20% of their claims over two years, according to court documents filed in U.S. Bankruptcy Court for the Eastern District in Sacramento.
The formal legal plan is based on a five-year road map City Council members approved at the end of November, tackling $195 million in unfunded city pension obligations, cutting payments for retiree health care, reducing pension benefits for new employees, raising pension contributions for current workers, and creating a rainy-day fund.
Union Bank, the largest creditor, is owed $50 million after holding letters of credit on four series of defaulted COPs. The filing indicates Union Bank will get a new “lease-leaseback” obligation in exchange for canceling the COP series. It will also get $6 million of unspent proceeds from the COPs held under trust agreements.
Union Bank is slated to get 40% less than what it would have received from the original COP scheduled payments, according to the Vallejo filing.
Vallejo’s exit strategy includes restructuring the debt owed to unsecured creditors, many of which are employees and retirees, by creating a $6 million pool of cash that will be paid out over two years. They will still be able to pursue one of the city’s insurance pools to settle the liabilities, according to the documents.
Vallejo is certainly not the last to file a plan of reorg that attributes its GUCs nuisance value. We wonder when these same GUCs realize they are nothing but a nuisance: today the MUB actually closed up.
h/t Bruce Krasting
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It depends on what you consider "good shape". In ranking of the 50 states, Texas has the worst pollution and the worst public education.
well, considering who defines "pollution" and what constitutes "public education", it seems Texas is in better shape than i thought.
Please tell me that remark wasn't serious.
Worst pollution and public ed. Who fing cares.
You would care if you had to swim a toxic cespool to get away from the uneducated, gun-toting redneck looking to rape you!
Are you a member of the NEA? California resident?
Texas just fucking rocks!
The Federal Government of the USA no longer deserves the sweat off my balls.
I will defend Texas with my life.
Municipalities should each be evaluated based upon their own circumstances...
I agree, they "should" be. Vallejo has been on the ropes for a very long time. They were seduced early on with the residential housing value appreciations and bought heavy into "real estate never goes down / they're not making it any more / location,location location" the gold jacketed parrots spewed. Used to be $1K increase in value for each mile closer to SF on the I80 corridor.
Vallejo's problems however are the same ones being fought and addressed all around so "Harbinger" to me is a reasonable term to capture the the attention of people to the actual event of this haircut taking place.
As a "Harbinger", it may not necessarily mean all others will inevitably follow suit, but I think turning in state issued cell phones is a woefully inadequate response to rectifying our states issues.
Union bank got used like a retarded cheerleader on those COPs.
That is a bold claim to suggest Vallejo is a harbinger of a coming muni bloodbath. It is a specific case in a specific municipality.
http://www.youtube.com/watch?v=3jMBNesc-8k&feature=related
Did the collapse of Enron portend a collapse in the energy service industry? No.
no but it is a glowing example of an insane, corrupt, and financially troubled government/corporate /criminal world.
If you are that cynical, maybe you should consider living in a cave with some guns, gold, silver and MREs.
Scratch the MRE's. After 2-3 days of those you get a LOT of pain and pretty wierd colored shit. Keep you alive? Sure. Make you wish to die? Definitely.
Wheat snack bread + bacon cheese spread = Yummy
funny, I thought most readers here were past the first Kubler-Ross stage
I think you are at step 4:
http://en.wikipedia.org/wiki/Kübler-Ross_model
http://dictionary.reference.com/browse/putz
MRE-3 words, 4 lies.
- Ned
The 10 most insolvent U.S. states are: California, Florida, Illinois, Arizona, New Jersey, Michigan, Nevada, Oregon, Wisconsin, and Rhode Island. These states make up about one-third of the U.S. population. Not included in that are New York, Connecticut, etc. The municipalities in them depend on money from thier respective states.
How is the weather in la la land?
<<< How is the weather in la la land? >>>
The weather here is sunny and nice. I don't know how it is in the cave where you seem to be holed up.
Each munucipality must be evaluated based upon its own fiscal condition to determing the investment worthiness of its bonds.
LOL, you're saying nothing.
<<< LOL, you're saying nothing. >>>
Saying nothing is more sensible than saying that the fiscal woes in Vallejo portend a muni bloodbath.
You're exactly right, the situation in Vallejo doesn't imply anything about other munis, the coming muni bloodbath was obvious way before this Vallejo thing came up :)
+1
(Whoops. Think I double tapped the Save.)
Quantify your remarks, geezer. Tell us what a "bloodbath" involves.
The situation in Vallejo has ZERO bearing on the worthiness of munis issued by municipalities in other US States.
+0.0001
Great. Check the books city by city. While you're doing that, if your IQ reaches 50, sell!
Guess I better give my Mensa card back...
Enjoy life in your cave. Watch out for cave trolls.
Mensa card, wow, you must be brilliant then.
Top 2%... according to them.
Self-proclaimed elites brighten my day. I always catch myself smiling and thinking: "At least I'm not like him".
You are not like me. You are not as intelligent. Ignorance is bliss. Smile on, nimrod.
And according to the transitive property of mensa. Once mensa accepts that your brilliant everyone else must accept it as well.
You can't create acceptance for ideas by declaring mensa has put a tramp stamp on everybody's brain you are free to fuck it and if people don't enjoy it and say you suck at fucking my brain. Then there's something wrong with them. Even if you are intelligent you can't propagate that intelligence. True intelligence comes from the same place true wealth comes from. Other peoples resources. I'm not smart because I can somehow generate a huge field of smartness. I'm smart from repeatedly sharing ideas and testing them for fit with other peoples experiences and perceptions. If the information you share isn't satisying them than it's not satisfying them and taking it up a rape notch doesn't help anything. You are free to present disatisfying information all you want. But you present nothing other than some vague theory that just because one state is in trouble doesn't mean all states are in trouble. Unfortunately if you understood our fiancial system you would not be saying that. Our government is able to print money steal from everyone and do whatever the hell it wants. It pretends that states can do that to. By simply issueing bonds and doing whatever the hell they want they don't have to actually collect the support and taxes of the people. But the states in the end can't counterfeit their way out of it and essentially force tax everyone. They simply treat the tax payers as payment makers in a debt pyramid.
Now that you have engaged in a true sharing of intellect and understanding you can compare it to your pathetic attempt at sharing and communicating. I want you visualize the people on this board. Everyone popping out ideas and understanding and everyone chasing them around simultaneously seeing where it all goes. We do reach some agreements but there's many things we can't agree on. But they've been discussed at great lengths so there simply isn't enough information or there's too much conflicting information or there's surprises in the woodwork. People have lived their lives and their lives are what they know. You can't simply invalidate them at will unless you are certain they are presenting lies to you with some ulterior motive. You know by how well they explain themselves and how they handle conflcting information.
The monopolization of sympathy has gone well for the powers that be up until lately. The monopolization of truth has always been a train wreck and always will be. The monopolization of brutality and cruelty is just a few missteps away from going corporate to crowd sourced like a mother fucker.
The masses are questioning. Satisfy them or zip it the fuck up. The truth is a ball. It laughs at your bell curve.
Here's some free advice: Don't drive after you smoke crack.
I don't know how it is in the cave where you seem to be holed up.
Moldy, skanky, and smelly in there. Speaking of which, your girlfriend says hello.
I hope she told you she has herpes and AIDS before you went down on her. As an FYI, that viscous liquid that is oozing from her private place is not really caramel or nougat. I hope you had fun while it lasted...
I never said I touched her. I just said that smelly, skanky and moldy reminded me of your girlfriend. Way to read a sentence, mensa boy.
She told me you went down on her, and that you lapped up her juices the same way you lap up the doom-and-gloom pablum published on this site.
Don't be intimidated when in the presence of a superior intellect. There is a place for you in society. The world needs ditch diggers. No, go get your shine box.
Thats the best you got? After reading your comments here, most of us cannot even believe that out of, what, like 500 million sperm, that you were the quickest.
/thread
Believe it, lightweight.
The rare one man circle jerk
Who said I was a man, you sexist pig...
John Law
You are a MENSO
http://en.wiktionary.org/wiki/menso
Don't bother, since mensoism is an inborn defect, your card is irrepudiable.
+++
That was definitely the post of the week.
Do a dilligence. Kill a ponzi.
Put the crack pipe down.
Caution, net-bot.
no... we are not! mortgages yes... state finance, no.
Actually, I believe the collapse of Enron did not only portend but cause the collapse of the energy services industry in the deregulated form that Enron helped create. Enron grew into a monstrous parasite that could only lead to it's own demise by either killing the financial well being of its host (the utility customers) or be recognized as a malicious parasite and be fought off by the immune system of its host. Fortunately in the case of Enron the latter happened.
Perhaps the case of Vallejo is a prodrome for other municipalities accross the country where looming underfunded pensions is leaching dry the fiscal surviveability of its host. An argument could be made that the original GM was a harbinger of things to come for municipalities whereby the unions acted as a parasite to such an extent that the legacy costs could not be borne by the the corporate host even with the government bailout. Now the municipalities may be facing something similar where there is just not enough income to fund the outflow to support the legacy costs of the gold plated pension plans for its soon to be burgeoning city, state and county worker retirees.
It's hard to know what is going to happen but you seem to be under the misapprehension that economics is an exact science where we just need to punch into a calculator some numbers found on a municipalities books and out will pop an indicator of its fiscal future that we can be mathematically certain of. It's just not that simple. Myself, I'll take all the epistemological help I can get in evaluating economic trends. Any real life models, such as Vallejo are invaluable in sorting out how the variables as existed in one municipality were correlated with a given economic outcome.
As in all things financial, there is always and ever only *one* roach.
The financial health of Vallejo as a municipality has no direct bearing on the financial health of municipalities in other US States.
So the extraordinary similarity of nearly all muni ETF charts, plus the fact that they are down 30, 40% during a period when the major market indices have nearly doubled, is merely coincidence.
I see. Thank you for your insights.
How did you manage to get the captcha question correct in order to post a message here?
The fiscal health of Vallejo has ZERO bearing on the fiscal health of municipalities in another US states. Do you have the mental competence to grasp that? Each municipality has its own budget to maintain.
I personally don't care what any muni ETF chart indicates. I don't own muni ETFs, and I would never advise doing so.
Where are all these financially healthy cities? You're making it sound like the current depression is just a little dip. Absent an improving national economic picture, cities across the country will be facing the same problems as Vallejo sooner or later. Yes, some cities and states will fare better than others. But the whole "harbinger" concept in the headline is that we are on a downward trajectory overall, not that Vallejo will somehow 'cause' munis across the country to collapse. Perhaps you disagree with the downward trajectory thesis, but the evidence presented daily here suggests it's true.
<<< the evidence presented daily here suggests it's true. >>>
Tyler has a terrific track record on the equity markets over the past 1+ year, doesn't he/she? The stock market must be about to crash any day despite the daily calls for doom and gloom.
Each municipality must be evaluated on its own merits. Vallejo is one case.
Ah, so you're here for trading advice. Good luck with that.
I do not trade the stock market. I came here hoping to LEARN from this forum. I have learned that this forum is a glaring demonstration of Group Think with an overwhelmingly cynical bias
funny, now when I walk into a place and don't like the company, I usually leave. In the past, when I disagreed, I told people I'm in the top 2% and that they are just too cynical and ignorant, but they just called me an asshole...
Davey, FTW!
Looks like we found Johnny Bravo's new handle
Who cares what you would do. I am not you. Your suggested course of action is of no interest to me. As an FYI, I did not claim to be in the top 2%. I clearly stated that I am a member of Mensa, and Mensa claims its members are in the top 2%. I can not confirm or deny if their claim is true because it is THEIR claim based upon their data.
BTW, maybe you really are an asshole...
+100
John Law Lives
"The articles and the majority of comments on this site are a remarkable demonstration of "Group Think". Maybe you are too far immersed to recognize that."
"Tyler has a terrific track record on the equity markets over the past 1+ year, doesn't he/she? The stock market must be about to crash any day despite the daily calls for doom and gloom."
I have considered this "Group Think" aspect from time to time. And then I listen to a hedge fund manager who has returned 18K on an initial 1K investment as of 1999. Coincidentally, this manager views on the global macro picture are fairly well aligned with Tyler (sans the volcano).
The last two years have been flat for this manager. Does that mean this particular manager is also part of massive "Group Think"? Could be. But based on results, unlikely. You could probably make a case for being a little early to the party, OTOH. Early to the party? Better early than late. And at this stage in the game, do you really blame anyone for taking a "wait and see" approach?
Another lie perpetuated by Wall Street - "You can't time(just stay in)the market." A better mantra might be, "Don't expect to make money every year."
EDIT: I thought I was addressing a sane man. Posts say otherwise. Mensa? Sure.
Mensa...<chuckle>
Mensa is the top 2% of the mediocre and insecure.
Mensa and Intertel.
You won't learn much from the comments, but the articles are interesting.
Yes, but so what? If you ask a specific question, there are 'lurkers' here who are quite knowledgeable, but you appear to be flaming or trolling, so they will tend to ignore you.
In other words, you gotta give action to get action.
Let's say there are 3077 counties in the US, and of those, let's estimate that 10% are insolvent (307), and their outstanding debts are roughly the same size as Vayayho (i.e 600mio), which is 184bio in bad muni paper, not a lot, but enough to drive investors out of the muni market, selling down the paper as they leave, hence bloodbath.
IF Vayayho is successful in discharging it's debts for 5c in the dollar, other insolvent counties will follow as sure as night follows day, because there sure as shit isn't any other way for them to pay their debts. Once you have a few successes in avoiding fiscal responsibility, what will follow will be a flood. The speed at which it spreads will bring deep fear and panic in the muni market, with no one knowing which county/city is going to default next, hence bloodbath.
So, to answer your question, IT DOESN'T MATTER HOW MANY SOLVENT COUNTIES THERE ARE, what matters is how many iNSOLVENT counties follow Vayayho's example, and how fast it occurs. Hence bloodbath.
You, XP, Sir is the voice of clarity.
One can only try, with enormous difficulty to write covering all the angles, in the anomaly 0f the current situation.
Thank you all for sharing.
Thank you :)
The interesting thing is, in historical terms, the current situation is not that anomalous. While the details vary somewhat, a great many Empires have collapsed in similar fiscal circumstances. And in each of those collapses, there was denial, and disbelief, and incredulity, but fiscal collapse is an inevitability, at least in historical terms. Can the USoA be the exception to the historical rule? Certainly not the way it is behaving now. Stimulus,QE,denial,dishonesty, all of these are irrational responses to the circumstances, driven by an emotional sense of entitlement. This is not how you save an economy on the brink of collapse.
Of course, once the barbarians moved into the western sphere of the Roman Empire, it took another 300 years before Rome was completely finished as a superpower. The decline in those days took a long time. Putting that into a modern perspective, the US Empire probably has another 20 years to run, as a fading superpower. The first shock in a decline is always the worst, then people adjust, and the subsequent decline becomes the status quo.
You are most welcome.
"IF Vayayho is successful in discharging it's debts for 5c in the dollar,"
UNSECURED creditors, 5 to 20 cents on the dollar.
What's the ratio or secured to unsecured outstanding?
And what are the secured debts SECURED by? Are the bond holders going to come in and take the police station, firehouse and city hall buildings? Sell the Mayor's town car?
You are correct, oh ye wise top 2%, there is no systemic debt problem. Vallejo is no Valhalla, Ragnarok is yet to arrive.
Modern translation: "Nothing to see here, move along, move along."
UF
You are too dense to argue with.
I heard the conflicted Arthur Levitt say something similar on Bloomberg's second show last week. Implying Whitney has it all wrong.
New concept to your mantra: "analagous situation."
- Ned
No, but it will give muni-investors a 5 hour energy triple shot wake up call. Oakland (down the road from Vallejo) is going to have fun in its next bond auction! The last time I drove on the 580 freeway there was a banner on a building advertising starting police pay at $72,000 a year. They can't support those levels of pay when their revenues are getting hammered (property tazes and income taxes) and pension costs ballooning.
Love me some music from Oaktown anyhow! http://www.youtube.com/watch?v=OAqUP4Dt5co&feature=related
wow... Toasty!!
http://www.youtube.com/watch?v=fTyIKnRQdx0
Hey as long as the banksters pockets are stuffed full and stocks up daily, WTF all is WELL!!!
Sweden on Wednesday cancelled the sale of four billion kronor (450 million euros, $600 million) worth of treasury bonds, blaming higher yields in the neighbouring eurozone for driving down interest in Swedish debt.
"We issued two bills, one was at six months and that was sold completely as we wished," Marja Laang, a spokeswoman for the Swedish National Debt Office, told AFP.
Note to Vallejo city managers: If this isn't a 'rainy day' I sure as hell don't know what is.
Pack it up and move along; nothing left to see folks.
Rainy Day:
http://www.youtube.com/watch?v=dPmbT5XC-q0
You bastard.
It had taken me 4 decades to get that song out of my head.
Sleep with one eye open.
That is funny. Except the bastard part. Just for that, take your own advice. LOL
I prefer this one:
http://www.youtube.com/watch?v=k2RhrwyWtXQ
excellent choice, haven't listened to this in some time. thanks
5-20% sounds about right. But I don't invest in munis
Man, if this isn't a see I told you so, I don't know what is. Municipal bankruptcies are like GM bankruptcy...the bond holders don't even get a kiss or a reach around.
It depends:
During the pendency of the bankruptcy, the City of Vallejo has continued to make all payments on its non-General Fund obligations (including water revenue bonds, tax allocation bonds, and assessment and improvement district bonds) on time and in full. The majority of this debt, approximately $62 million, consists of water revenue bonds, which are paid from the net revenues of the City’s water enterprise. On May 12, 2009, the City adopted a new five-year rate schedule for the water system, which is expected to meet the financial requirements of the enterprise through FY2013-14. The Special Assessment and Special Tax secured debt is not expected to be affected by the chapter 9 case.
Payments on General Fund debt service, however, have been paid at less than contractual rates since July 1, 2008. Interest was paid at a reduced rate from July 2008 until April 2009, when the City temporarily suspended all General Fund principal and interest payments from May 1, 2009 through July 1, 2009. Payments resumed with adoption of the Fiscal Year 2009-10 budget which reauthorized principal and interest payments at a 2% interest rate, which is a less than both the respective contractual variable and fixed rates due on these issues. Future and ongoing General Fund debt service payments will be subject to and may be affected by the outcome of the chapter 9 case.
Weird to see the General Obligation bondholders in worse shape than the revenue bondholders.
Actually it is usually the reverse so that is weird. But in the end this is just one small domino. Jefferson County, AL has yet to be fixed, IL is in horrid shape as well as many of their counties are in bad shape, and CA is full of more Vallejos but they just don't want to talk about it.
Banksters are not the only ones carrying the valuations of homes that have been empty for 3 years on their books at 2006-2007 price levels.....
It is a lesson in the intricacies of municipal finance. GOs were considered the safest because muni bankrupcy was almost unheard of. Credit has always beens very local and very specific--this was obscured by the false-fungibility created by the bond insurers AAA everything regime. I've always liked a well put together revenue bond--especially utilities. Secured.
Bastiat-who are the muni bond insurers? They'd seem to be good candidates for certain forms of "investment".
- Ned
The muni bond insurers are (were) FGIC, MBIA, AMBAC. They go lured out of their muni insurance sandbox into insuring CDOs, lending their AAA ratings to the toxic fraudulent crap put together by Wall St. None of them have a rating to sell anymore. One is still in business Assured Gauranty; Buffet started one up but they are so selective as to be not really in the business. So all the AAA insured bonds went to ??? after 2008. Investers got clobbered (if they wanted tos ell their bonds) as their price went down with their ratings. Particularly brutal for small issuers because very few put in the time to analyse a small credit. These downgrades also tirggered derivatives penalties, which cascaded
etc.
He He HE HE Wipeout
http://www.youtube.com/watch?v=W5D07c0dJuQ&feature=related
Now~~~~~ B T F D
with
restricted canadian silver mining penny shares
May 26, 2010|By Maria L. La Ganga, Los Angeles Times
Reporting from Vallejo, Calif. — First came the break-in at the combination electronics repair shop and real estate agency. Then came the burglar bars on the store's plate-glass window.
But Jimmy Mozaffar, owner of Data Days, sounds less angry with the criminals than he does with the crime-stoppers here in hard-knock Vallejo, the largest city in California history to file for bankruptcy.
The thieves made off with laptops, but it was the pared-down Police Department — which has lost a third of its officers — that stole Mozaffar's peace of mind. When Mozaffar called the department to report the burglary last fall, a recording directed him to a website.
"Nobody came out," he said. "They said they'd deal with it."
Since filing for Chapter 9 bankruptcy protection two years ago, this scrappy Bay Area bedroom community has come to symbolize the fiscal troubles — now faced by many cities — that helped push it to the brink: unrestrained spending, out-of-control pension costs and a burst housing bubble.
"I don't think other cities look at us with a jaundiced eye because we've filed bankruptcy," said Mayor Osby Davis. "Other cities … look at us and say, 'Wow, we're a step away from where you are. We just want to know, how are you getting through this?' "
The answer, so far, is not so well, although "the hardships visited on Vallejo residents are not because of the bankruptcy," said Marc Levinson, the city's lead bankruptcy attorney.
"The bankruptcy is an attempt to fix it," he continued. "If it hadn't been for the bankruptcy, the problem would have been worse. The city could not pay its bills."
Evidence of municipal misery is widespread. Foreclosed homes are sold in front of the Civic Center so often that City Hall is plastered with signs warning auctioneers not to conduct business at the lobby information desk or the monument to fallen firefighters and police officers.
Sixty percent of all borrowers in the Vallejo area owed more on their mortgages than their homes were worth in the first quarter of 2010, according to CoreLogic, compared with 24% of borrowers nationwide and 34% in California.
Property and sales tax revenue are expected to drop 18% and 10%, respectively, in the current fiscal year. The city's general fund has plummeted 20% in the last two years.
Some eye-opening statistics especially with regard to the 60% upside down data point...I wonder if municipalities in general will attempt to increase real estate taxes to make up the shortfall...of course that may cause even more people to default but for the bureaucrats that is a worry for another time.
robbing peter to pay paul. higher real estate taxes will do wonders for the already fictional real estate values. There is no way out but through. Now if we only had some leaders. Actually spent some time in Vallejo and know some people who live there. Extremely depressing now. Got a call about six months ago, son in a family I know who lives there was depressed and could not find work, killed himself. We always talk about violence that may be directed at others but I think we are in store for plenty of this. And the bankers smile
I think we are in store for plenty of this...
I know a lot of light hearted and even mean spirited discourse occurs here, but your story of the son while not unique, is the "tap out" card in fight club parlance. I suppose in Mao's time and frame of mind it would be seen as paring society of the weak, however when these events are actually met with laughter, scorn and /or disinterest, I'm left to believe we've entered third world status.
If I truly believe any of us, even bankers, would smile at this kind of violence as you've correctly called it, that should be the Harbinger to move on to step 5 and beyond because the first steps only encourage evil to become more so.
well said
It's actually worse if you can believe it - Home prices are being held artificially high in vallejo especially by the MASSIVE supply of foreclosed on homes that the banks are holding off the market. Friends of ours were house hunting a few years ago and were shocked at all the vacant houses that are simply not for sale because the percieved sale price is so scary for the bank (and imagine if they were released) they'd rather just hold them.
You know, this would be an absolutely golden time for the NRA if they knew what they were doing.
Start teaching merchants and ordinary citizens on how to use a gun, in the wake of the collapse of the local Police. In the heart of liberal California, no less.
It would be an incredibly missed opportunity for the NRA to not do this.
Agree in part, however have you been to Vallejo? Its a Latino gang town.
I don't think the NRA would want to teach these guys.
~Misstrial
Yes, I go through there at least several times a year. Vallejo has nice parts, mediocre parts and not so nice parts. "A Latino gang town" is an over-exaggeration. They have a number of good businesses and areas there.
But you do have a valid point. So teach the ones who have, and make, some honest money. Otherwise, yes, it will turn into a South-of-the-border gang town.
Argentina, times 10000, here we come
Why aren't the current retirees taking a haircut? What kind of bankruptcy court is this? Send the pensions to the PBGC for a haircut like the private sector!
Why? So we can all cough up cash to pay for their pensions? Leave it there!
The public employees took a haircut first before anyone else. Vallejo filed bankruptcy specifically so they could get out of the contracts.
Fucking awesome. laws of Physics and Nature having their say. Unfortunately, it might be awhile before it "bubbles" up to wall street and K street.
All, while I am a bear on muni credit, this has very little to do with bond recoveries, as those are generally secured by specific revenue streams (water, sewer, gas) from municipal utilities or pledges of specific tax revenues. Those pledges mean that the bond holders are secured. The COPs referenced and owned by Union Bank are an exception in that they are typically a participation in a lease stream which is only backed by the general credit of a municipality (like Vallejo) or a school board. COPs are, in my opinion, a thinly veiled attempt to get around the more rigorous requirements that typically apply to general obligation bonds (which often require voter approval), and COPs were justified because they were only done where the underlying lease was on a piece of municipal infrastructure that was unlikely to be walked away from. However, small businesses, large vendors, and employees will be getting the shaft, and this will guarantee that, over time, municipalities have to pay serious premiums for goods and services.
Josey, you are correct that bond holders are secured creditors. The nature of their security depends on the bond: a GO bond is secured without limit by taxing authority of the issuer. A "Revenue Bond" is secured by a specific, defined revenue stream as you point out.
COPs are secured by specific properties. For instance, City hall itself may be lease-purchased rather than funded by GO bonds. Participations in the lease are sold, essentially pass through certificates to the lease payments. In the end the City owns City Hall. If payments are defaulted on, the Trustee takes posession (control) of the Asset. The tenant can be evicted, the asset liquidated. In the case of asset, like City Hall, which does not have a reasonable alternative use, the terms are usually renegotiated. COPs are also subject to annual appropriation -- the City, or other issuer has not obligation to appropriate money for future payments and can walk away.
I think the City Hall would make a nice Brothel.
'would make'?
WTF? ARE
Yeah but right now you don't even get a happy ending.
+100 False advertising government is false.
wtf, a junk for that? It's comedy gold, I tell ya.
I got the joke. It was funny. I laughed.
AND NOBODY ELSE REALLY MATTERS!!
+1 Funny.
comment of the week award
Futurama, always good for a site gag:
http://bradcpu.com/citihall.JPG
Love it.
Or another house of the evening...
"as those are generally secured by specific revenue streams (water, sewer, gas) from municipal utilities or pledges of specific tax revenues"
You can't diversify away systematic risk and moral hazard makes it all systematic.
The financial establishment should have thought about that before taking the candy from the creepy bald-headed man and the creepy bearded man.
Now bend over America. This won't hurt....too much.
GOVT got GM a nice deal. These guys should have got the Feds to back em
Give the city to the bond holders and let them run it. Then the squid could do an ipo on the bk sob and make a fortune. Later they could flip the whole thing to calpers and give themselves all bonuses. VAlley Joe is not exercising their options according to wall street sop very well.
+1
+0.05 -- 0.2
Buy the dip! Buy the dip, sh*ts!
but...but...MUB closed up!
Even high-yield muni's (HYD) closed up 1.36%
Nice to get "regrets" from the city
when they screw you for 95% of your
dollar, ain't it. They're very sorry.
Tyler,
hmm hmm
So Sky is bringing this fine piece of news. Sky's owner ... uhm ... a good old Ruppert Murdoch.
Ojeeee... Chaos Computer Club ....
Rop Gonggrijp (wiki on him)
Julian Assange
I get your drift.
Engrish prease...
Meredith, you were right. In celebration, let's go out to dinner. I don't normally go all the way on the first date, but I'm not ruling anything out.
Yes and she is getting trashed in MSM because she had the balls to call it.
That's it. If she has balls, then I'm gay....
Meredith ain't no Valley Ho.
Won't be long before it's impossible to sweep this Bullshit under a rug.
A ZeroBullshit administration awaits us all.
Just the tip of the iceberg. While you are correct one failure does not fortell what will happen with other cities, just a little home work will show you that hundreds of towns are in a dire situation and unable to pay bills. Just the beginning all, just the beginning.
FFIV now down 25%. Buy the dips? What a crock of shit this market is. I know, I know, company specific. Soon you will be advising country specific.
0
Bangladesh has no HFT.
Rock band Knickleback strangely attracted to this deal. Buys all outstanding bonds.
<cough> you mean Nickelback ?
quadrouple post
quadrapule post
quadrapule post
<cough> you mean Nickelback ?
You mean 5 tuple. :P
lol :)
What are the odds of having a 5 tuple post in a nickleback joke. Hmmm. What are the ODDS!!
He just made a "Bernank QE error "
get it?
5 times...
OH WHATEVER!!
Yeah, all cities are unique, just like all subprime borrowers.
It's the revenue source -- real estate taxes --- and the fixed expenses ---public union employees--- that make Vallejo a canary, not an outlier. Unless, of course, you can name a city that doesn't run on real estate taxes and public union employees...