Sunday, August 19, 2012 – 10:00 a.m.

As fears of more California municipal bankruptcy filings continue to slowly climb, there is one group that must be deeply concerned these days.

That group being municipal bond and mutual fund investors.

San Bernardino, the latest California city to file for chapter 9 bankruptcy, has $46.1 million in tax-free pension obligation bonds outstanding.

The proceeds were used to fund a shortfall in the city’s obligations to the California Public Employees Retirement System (CalPERS).

Now the city is faced with owing another nearly $150 million to CalPERS. An amount it must pay regardless of its bankruptcy filing. But even more importantly is the fact the pension obligation bonds were backed by the full faith and credit of the city treasury.

A treasury that is now empty.

Translated this means the bondholders are now unsecured creditors waiting in line who will likely receive pennies on the dollar, if anything.

There is billions in unsecured California municipal debt floating in the marketplace today, and the investors who hold it must feel a little nervous.