Here's Hartford's Risky Plan To Strongarm Concessions From Its Creditors

Tyler Durden's picture

After Hartford Mayor Luke Bronin had warned Thursday that the capital of the wealthiest state in the US could be broke in as little as two months, city officials scheduled a conference call with bondholders to begin restructuring talks, according to Bloomberg.

As we noted earlier, Hartford’s financial troubles have been compounded by a broader crisis in the state government. But the city’s yearslong descent into insolvency has been hastened by corrupt and incompetent political leaders, fleeing middle-class residents – and now the hollowing out of the insurance industry that once provided a crucial tax buffer. Last year, insurance giant Aetna announced that it intended to move its headquarters to New York City, though it would leave thousands of employees to continue working in Hartford, the decision was still a financial – as well as a reputational – blow.

According to Bloomberg, city officials, who’re being advised by law firm Greenberg Traurig, will try to convince creditors that restructuring is necessary to guarantee the city’s fiscal stability. Of course, to wrangle better terms from its creditors, it helps to have leverage. And in a recent column, the Hartford Courant’s Dan Haar reveals one “shocking” strategy reportedly being contemplated by city officials: Asking that the state withhold aid unless the city’s creditors agree to concessions.

This would be tantamount to “strong-arming” creditors by removing the backstop of state funds, which could backfire on the city in several ways, Haar said.

“And there’s much more friction: Bronin’s letter, co-signed by the city council president and treasurer, also contains a shocking new suggestion — that the state help the city strong-arm bondholders by making new money contingent on Wall Street givebacks. Bronin hired a New York law firm to renegotiate Hartford’s costly bond debt, and now it appears he is asking the state to help that effort.

 

That could backfire on both the city and the state in much the same way that then-Attorney General Richard Blumenthal’s lawsuit against the Atlantic Coast Conference led to the blackballing of UConn. To this day, the university remains banished to a second-tier athletic league. No one likes to be strong-armed, and the last time I checked, Wall Street bond houses are not peopled by pushovers.”

So, how might bond holders retaliate if Hartford mayor Luke Bronin embraces this aggressive strategy. Well, they could not show up to market next time Hartford tries to sell a batch of general obligation bonds. After both Moody’s and S&P cut the city’s credit rating to junk in June, they could interpret a rift with bondholders as another potential obstacle for the city.  

“If the state took that posture with regard to full faith and credit general obligation debt, it could potentially jeopardize the evaluation of its own credit,” said Howard D. Sitzer, senior analyst at CreditSights in New York, which launched bond coverage of Hartford last month.

 

Still, the suggested ploy to squeeze money from bond investors makes a broader point: There is more Hartford, and Connecticut, could and must do before a bankruptcy judge would accept a filing and bring all the parties to an unhappy table.”

Of course, Hartford has a handful of options that could - if not solve its fiscal problems - at least help it kick the can down the road, the goal of every sane politician with aspirations of running for higher office. Bronin probably Harbors such ambitions. One such option would be a state takeover. In theory, this would bring fresh cost-cutting eyes to the picture. It could also force the police and municipal unions to offer more concessions.

Another measure, suggested by Moody’s and others on Wall Street, is a more moderate restructuring. Yet another is “more aggressive cash management,” essentially delaying payments to vendors. Prioritizing pursuit of tax delinquents is also an option.

The city could also cut back on payments to its retiree pension and health care funds.

“As it happens, the city is fairly well funded in its pension. But Bronin said, “We are not interested in short-term fixes that make the future more difficult.”

Whatever it decides, the city needs to act, because a Detroit-style bankruptcy, Haar says, would “add to the caravan of moving trucks exiting Connecticut” – a reference to the resident flight that has plagued the state in recent years, after lame-duck Democratic Gov. Dannel Malloy passed a series of controversial tax hikes to help shore up the state’s pension funds.

However, Bronin probably knows that he can't depend on the state government for support. Connecticut is now the only state in the US that hasn't passed a budget for the current fiscal year – its government has been operating for two months under emergency measures imposed by Malloy that have delivered dramatic cuts to municipal services.

If not Bronin’s best option, asking the state to predicate any bailout funds on investor concessions might be his only shot at securing a lasting fix.
 

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SHEEPFUKKER's picture

The wealthiest state is BK? That makes no fukkin sense. 

Kaiser Sousa's picture

reminds me of Blazing Saddles when the black sherrif held the gun to is own head and said "dont move or we'll shoot the nigga".

great country aint it...

grasha87's picture

I have a solution to the problem of the monetary system based on debt which cause recessions. It's called the wallark, and is a currency based on Say's law: https://bunky1787.wordpress.com/2017/09/06/the-wallark-neo-scrip/

Vatican_cameo's picture

 

"One such option would be a state takeover. In theory, this would bring fresh cost-cutting eyes to the picture".

Because Malloy & Co. have done such a "Bang up Job" keeping Connecticut out of a $5 Billion dollar hole?  These Asshats "Can't pour piss out of a boot with the directions printed on the heel".  If you think Malloy fixing your problems is the answer, there aren't words to describe your Special Kind of Stupid.

roddy6667's picture

A few years ago the Hartford schools were so bad that the State had to take over. I think they lost their accreditation for a while.

dark pools of soros's picture

is the whaling business in the skids? they still do that shit up there?

Déjà view's picture

Naw...grandstanding at Wailing Wall...

Conscious Reviver's picture

I saw Ghordie Howe skate around with the Whalers.

Grandstanding? More like humping the Wailing Wall. Easy to find on YouTube. Then there's this - https://m.youtube.com/watch?v=HHgxOXEQaFU

Hat tip to lil dirtball.

detached.amusement's picture

+1 for gordie howe, I saw him skate with the whalers too, back in the day

DinduNuffin's picture

we solicited gordy for little league money -- he was tight -- not even a handshake for the kiddos

Omen IV's picture

time to do the right thing and cut the pensions to zero / get rid of public education which is a  waste of time  and money will never be missed except as a baby sitting tool

bond holders will not create a prescident and give anything - default is better alternative than causing a domino effect with other states

 

 

grasha87's picture

I have a solution to the problem of the monetary system based on debt which cause recessions. It's called the wallark, and is a currency based on Say's law: https://bunky1787.wordpress.com/2017/09/06/the-wallark-neo-scrip/

Moving and Grooving's picture

I saw that a young woman is making $700. a day working for Google. Give that a spin for a few years and then get back to us, ok?

 

And when you have the time, follow up on BritBob's fascinating ideas about the Falklands too. They're really real.

 

Spamming asshole.

 

Edit: Almost forgot about Insurance Panda - they got it goin' there just like you do!

Mr.BlingBling's picture

That's a really cool old building, with the gold dome. I bet the city of Chengdu would pay a few bucks to have it relocated there.

TheAnswerIs42's picture

Where is Mr. Peanut?

Mrs. Fox?

The Royal?

What went wrong?

(Grew up and worked there in the 60-70s).

 

roddy6667's picture

Wow! Mr. Peanut! How about that retarded guy who sold candy on Main Street from a kid's wagon? And Bill Savitt? The Leow's Poli Theater? Sir Allo Shoe Repair by Brown Thompson and Sage Allen?

Ah, a time gone by. Back when blacks were not criminals and you could walk around on Albany Avenue without getting shot.

Bigly's picture

Omg.

I forgot about the candy guy....

You forgot D&L on Main St too

 

I am not seeing they will get their shit together. There are too many true statist progressives elected here as opposed to common sense old kinds of libs.

They are not looking at the source of all the ills. State pensions and benefits. Plus bloated incompetent teachers and admins salaries.

Address that and there could be a fighting chance. But they will not go against the unions.

optimator's picture

In the late forties my parents would take me for a late dinner at one of the great Italian restauants on Front Street.  No fear of the dark in those days.  Scolars for the sea food, and then there was the Connecticut Room resaurant in G. Fox.  All gone, but Capriccio's in the south end is still there, best Italian food around.

roddy6667's picture

I left after 65 years. 

optimator's picture

The kid's wagon was stolen a few times, replaced by do gooders who finally gave up on it.

Remember the infinity of mirrors in Fox's window.  Kofsky's shoe store with the radium machine to see the bones in your feet? 

Delphi_Addiction's picture

Maybe they can just raise the debt ceiling? 

SantaClaws's picture

When do the Hartford Police start employing aggressive asset forfeiture shakedowns on drivers?

Nick Jihad's picture

If only they were closer to the Massachusetts border. 

grunk's picture

Open the Lesbian Basketball Hall of Fame at U. Conn.

Megaton Jim's picture

What's the difference between a band of raiding pygmies and a girl's basketball team?

One's a bunch of cunning runts............

Bigly's picture

Ain't that the truth.

+1

sharkalert's picture

Vulture funds buy debt approaching bankruptcy! Most institutions and mom and pop investors are long gone. Look at Puerto Rico and how they declined into the abyss of muni debt. At the end of the process only savy players hold this junk extracting profit through a long gruelling process. These bonds have further to drop and Bronin's gamble will not be acted upon! Bronin has no idea what kind of sharks are circulating his fish tank. Bronin is playing checkers while is competition is playing chess!  Radical reform is the only answer. In the meantime lawyers make a killing litigating this mess.  

grasha87's picture

I have a solution to the problem of the monetary system based on debt which cause recessions. It's called the wallark, and is a currency based on Say's law: https://bunky1787.wordpress.com/2017/09/06/the-wallark-neo-scrip/

HRH Feant2's picture

What a shame. My grandfather was an architect and designed a few of the old buildings in Hartford. Along with being the captain of the local polo team in West Hartford.

There is a reason some of us refer to that state as Conneticunt.

Robinhood's picture

just another example of how socialism works.

As I prep for Irma in FLA I Am constantly reminded of how fucking stupid so many people are.

God designed natural selection for a reason let the fucking weak die.

If I am weak then I deserve the same fate

roddy6667's picture

It's not a failure of socialism, it's a failure of democracy. Everybody is allowed to vote, and they vote for their short term, selfish wants and desires. Nobody votes for their own future and the future of society in general.

 

Pleb_From_Windsorstan's picture

Capitalism forces everyone to think short-term. When you mix that with Socialism & Democracy, you get Hartford.

SunRise's picture

No - not Capitalism,  Fascism.

grasha87's picture

I have a solution to the problem of the monetary system based on debt which cause recessions. It's called the wallark, and is a currency based on Say's law: https://bunky1787.wordpress.com/2017/09/06/the-wallark-neo-scrip/

_triplesix_'s picture

Quit spam posting this shit, asshole

Pernicious Gold Phallusy's picture

The state will do anything to ensure public employee pensions, legislator and official salaries, and state contracts already awarded are not affected.

moorewasthebestbond's picture

Yankee scum.

 

Hoist the Stars and Bars!

robertocarlos's picture

Maybe that dome is made out of solid 18kt gold.

Stan Smith's picture

Maybe it could make a move to declare statehood like Puerto Rico?

bluez's picture

Well, anyone from Connecticut could tell you how Connecticut "works", or doesn't. Actually, Hartford is the only place in the state that begins to have a "big city feel", but it is very oddly disconnected from the other financial key part, which is mostly Fairfield County, which kind of leeches off of New York City. (Yeah, there's still that amazing fantasy world where the rich roam free up in Litchfield County.)

There was a lot of money associated with Hartford when it was the "Insurance Capitol of the World", but with that gone down to NYC, it has nothing. But Connecticut could never ever go broke unless NYC, which it leeches off of, were to go broke. Sort of. NYC seems to be relatively very well-off, but if CT is hurting, that tells you right away that there is some weakness in NYC. And if NYC is weak, then by extension, just about everything is weak. I know some people detest this point of view, but that's how I see it.

So if I'm right there's two things going on. Hartford has lost it's peculiar insurance "industry" mojo, and NYC is weaker than it appears to be (and thus the USA is too). But if NYC wants to claw back its CT commuter jobs, I don't see how Connecticut can sustain, unless they tax the very rich who reside (but are not technically "domiciled") there, but I don't see how they can get away with that. I think this has implications that extend far beyond CT itself.

2banana's picture

NYC.

Except for leeching off the rest America will bailout after bailout of their financial houses...what does it really do for America?

roddy6667's picture

When I was Realtor back in then Eighties in CT, Hartford was the 4rth poorest city in America. I don't think it is any better now, being 62% black and Puerto Rican. Hartford, New Haven and Bridgeport are poverty-stricken, high-crime ghettos now. In the suburbs and rural areas there are just normal people. In Fairfield county are the hedge fund billionaires and all the Wall Street moguls. On paper this adds up to the Richest State In America. Only on paper. Only for the top 5%.

A nest of liberals? Not hardly. Almost all  elections are very close with the liberals squeaking out wins. This is one of the flaws of democracy. It is a tyranny of the 51%, with 49% of the citizens having no representation in the government and all the policies favoring the 51%.

Of course all the keyboard experts like to rant about how CT is a liberal clusterfuck and that everybody is rich. Not true at all.

Bigly's picture

Roddy, I infiltrated a democratic town committee.

It is a MACHINE.

I am convinced there is voter fraud... big time.. even in some of these smaller dem controlled towns. And certainly Htfd, NH, Bridgeport, Waterbury, etc.  And look at all the convictim pols. Tip of the iceberg.

 

We gave a huge voter fraud problem, people.

Not everyone in CT is brain dead!!!!

 

missedthehurdle's picture

Definitely would have to agree.  Grew up in north Fairfield County in one of the less well-to-do towns...most of the money is along the Sound, but there are quite a few New Yorkers relocating along 684/84 border of NY/CT.  Family's in real estate and there's been influx of young families and professionals making the move from NYC/Westchester to Fairfield Cty since the Recession, like a ton of them.  

With that said, the rest of CT is a crapshoot hodgepodge of old money in Litchfield County and Northwest, bunch of nothing in the middle, rich communities sprinkled along the coast between crappy ghettos small cities.  The wealth is concentrated geographically in small pockets around the state but most of the population is blue collar middle class.  

I'd agree too about the politics...you have dem hubs in hartford, bridgeport, stamford and new haven which makes sense for urban centers.  But rest of the state is split.  My town has had a Repub mayor for a while now and done a fairly good job cutting waste and improving the city and local economy.

These are self-inflicted wounds in Hartford and statewide by Gov. Malloy.  I mean, I moved to SoCal (for the weather not the people, they're fucking horrible here) so I'm not one to complain about moron politicians, shitty taxes, and absurd business regulations.  End of the day my quality of life living right on the beach is much better than the rest of America, so I fine sacrificing a bit more money to wear shorts year round and have a healthy active lifestyle.  Then again, I work for myself so I get a lot more benefits than cubicle workers and drones.  With that said, I do like the year round atmosphere of CT, aesthetically its a really nice place to live, tons of hiking and parks, boating, wineries, really a ton of outdoor stuff.  Sucks that economically its not worthwhile to me to move back any time soon...or at least split my time there.

missedthehurdle's picture

Definitely would have to agree.  Grew up in north Fairfield County in one of the less well-to-do towns...most of the money is along the Sound, but there are quite a few New Yorkers relocating along 684/84 border of NY/CT.  Family's in real estate and there's been influx of young families and professionals making the move from NYC/Westchester to Fairfield Cty since the Recession, like a ton of them.  

With that said, the rest of CT is a crapshoot hodgepodge of old money in Litchfield County and Northwest, bunch of nothing in the middle, rich communities sprinkled along the coast between crappy ghettos small cities.  The wealth is concentrated geographically in small pockets around the state but most of the population is blue collar middle class.  

I'd agree too about the politics...you have dem hubs in hartford, bridgeport, stamford and new haven which makes sense for urban centers.  But rest of the state is split.  My town has had a Repub mayor for a while now and done a fairly good job cutting waste and improving the city and local economy.

These are self-inflicted wounds in Hartford and statewide by Gov. Malloy.  I mean, I moved to SoCal (for the weather not the people, they're fucking horrible here) so I'm not one to complain about moron politicians, shitty taxes, and absurd business regulations.  End of the day my quality of life living right on the beach is much better than the rest of America, so I fine sacrificing a bit more money to wear shorts year round and have a healthy active lifestyle.  Then again, I work for myself so I get a lot more benefits than cubicle workers and drones.  With that said, I do like the year round atmosphere of CT, aesthetically its a really nice place to live, tons of hiking and parks, boating, wineries, really a ton of outdoor stuff.  Sucks that economically its not worthwhile to me to move back any time soon...or at least split my time there.

directaction's picture

Too bad the hurricane doesn't smash Connecticut to smithereens

2banana's picture

2banana's Rule

Long term democrat rule + public unions + free shit army = misery, ruin and bankruptcy