Aug. 22 (Bloomberg) -- Representatives of Stockton, California, met with creditors and a mediator today in an effort to win support for a proposal it will file in court next month to cut debt and exit bankruptcy, the city’s lead attorney said.
That proposal would be a so-called cramdown plan, Marc A. Levinson, the attorney for Stockton, said in an e-mail today. That means the plan lacks widespread support among creditors. By meeting with the mediator, U.S. Bankruptcy Judge Elizabeth Perris of Oregon, the city could reach a deal with some creditors before the plan is submitted, Levinson said.
“The goal is to change it to a consensual plan before it is filed,” Levinson said he told the federal judge overseeing Stockton’s bankruptcy yesterday. “That, of course, depends on whether the mediation results in deals.”
Stockton, an agricultural center of 296,000 about 80 miles (130 kilometers) east of San Francisco, is among four municipalities that have said they will ask creditors including bondholders to take less than the principal they are owed. The others are Detroit, San Bernardino, California, and Jefferson County, Alabama.
Should Stockton file a cramdown plan, it can still try to negotiate a settlement, Levinson said.
Perris, the mediator, is also part of a team assigned to mediate disputes between Detroit and its creditors.
The case is In re Stockton, 12-bk-32118, U.S. Bankruptcy Court, Eastern District of California (Sacramento).
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