Wall Street lenders say they’re getting a raw deal in Stockton’s bankruptcy, losing millions while the city continues to fund pricey employee pensions.
The city says too bad.
A blistering statement issued this week by Assured Guaranty, a bond insurance company based in Bermuda, suggests that Stockton is the new battleground in the fight over retirement promises made to government workers.
Assured Guaranty complained that Stockton, after filing for bankruptcy protection, is stiffing bondholders to give preferential treatment to employees and CalPERS. The company called that “a contortion of the bankruptcy process” and said today it will press its argument in court.
Assured’s broadside raises new questions about a topic once thought to be out of bounds: whether governments can tamper with retirement plans.
While some corporations have used bankruptcy to cut their obligations to retirees, public-sector pensions generally have been considered sacred: Once workers go on the payroll, their retirement can’t be touched.
Responding to Assured’s claim, CalPERS said pension obligations take precedence over lenders under California law.
Read more here: http://www.sacbee.com/2012/08/03/4688241/bond-insurer-blasts-stockton-for.html#storylink=cpy