A mere nine months after we first discussed the inevitability of Stockton, CA.'s bankruptcy, a judge has ordered today that the city will now become the most populous in the US to be declared bankrupt.
- *STOCKTON CREDITORS DIDN'T NEGOTIATE IN GOOD FAITH, JUDGE SAYS
Creditors are pushing to get the city out of bankruptcy but the judge states that "by any measure" the city was insolvent. So, in summary, yeah, it was broke years ago, it still is broke - despite the best efforts by the Central Planning Reserve to reflate the same housing bubble that was the primary reason for the city's insolvency in the first place. Only this time, it's official!
Stockton, California, was ruled eligible for bankruptcy protection under Chapter 9 of the U.S. bankruptcy code, a U.S. judged said on Monday, turning aside creditors' arguments that the city was not truly insolvent when it sought protection last year and had improperly failed to seek concessions.
In a case that has been widely watched by the $3.7 trillion municipal bond market, U.S. Bankruptcy Judge Christopher Klein said Stockton had established during last week's three-day trial that it had met requirements to be found eligible to proceed with its municipal bankruptcy case.
Officials in the city of nearly 300,000, the largest city so far to have filed for municipal bankruptcy, will now be allowed to start drafting a so-called plan of adjustment for the city's debts.
The case is expected to pit municipal bondholders against the California Public Employee Retirement System, which manages pensions for Stockton and many other California governments.