Stockton Judge Extends Hearing in Fight Over Debt Plan
Stockton, California’s creditors, including public workers, will have to wait a little longer to find out whether the city’s plan to exit bankruptcy will win a judge’s approval.
At a hearing this week, the city sought approval of a plan that pays public worker pensions in full, while offering Franklin Resources Inc. (BEN) only 1 percent of what its funds are owed. San Mateo, California-based Franklin has argued that the pensions shouldn’t get preferential treatment.
“I do want to make sure that there has been a fair opportunity for all sides to be heard,” U.S. Bankruptcy Judge Christopher Klein in Sacramento, California, said today. Klein initially scheduled a further hearing for May 29, followed by closing arguments. The hearing was changed to June 4 after Franklin’s attorney, James Johnston of the Jones Day law firm, told the judge a key witness wouldn’t be available on May 29.
Stockton, a city of 298,000 about 80 miles (130 kilometers) east of San Francisco, filed for bankruptcy in 2012 after spending too much on downtown improvement projects while property-tax revenue plunged in the housing crisis. Creditors filed $1.18 billion in claims.
After months of negotiation, the city reached deals with most creditors, including bond insurer Assured Guaranty Corp. and current and retired workers.
Detroit, which filed a record $18 billion municipal bankruptcy last year, may face a creditor fight over similar issues, though on a much greater scale, when it seeks approval of its debt-adjustment plan.
The case is In re Stockton, 12-bk-32118, U.S. Bankruptcy Court, Eastern District of California (Sacramento).