San Bernardino Seal

By Ryan Hagen, The Sun
Posted: 10/08/15 – 8:36 PM PDT |

RIVERSIDE >> The bankrupt city of San Bernardino will have to produce much more extensive information — at a pace its advisers say will be grueling — before it can clear a vital hurdle in the path of bankruptcy plan confirmation, U.S. Bankruptcy Judge Meredith Jury said Thursday.

In large bankruptcy cases like San Bernardino’s, it’s common for hearings on the adequacy of the disclosure statement filed in support of the Plan of Adjustment to conclude more information is needed. And, based on objections from multiple creditors, that’s what happened in court Thursday.

But some of the critiques of the plan itself were sharp.

“I will say I’m not optimistic,” said Thomas R. Kreller, the attorney for Ambac Assurance Corp., securer of $50 million in pension obligation bonds for which the city proposes to pay $500,000 total. “And the reason I’m not optimistic is, as I think you read from our objection, it is pretty clear the city plans to pay unsecured (creditors) the least it can get away with, not the most it can afford. … They’re trying to disclose a plan that is fundamentally flawed.”

Jury said she wanted to save discussions on whether the plan itself can be confirmed for later, but she added that she wanted more information to show that the city’s plan wouldn’t lead to it collapsing into a second bankruptcy in a few years.

“I don’t really think it’s in anybody’s objection, but the public perception — the media perception –— of the two cities with confirmed (bankruptcy exit) plans, that being Vallejo and Stockton, is that they’re already in trouble because they didn’t impair CalPERS,” Jury said, referring to the decision — also made by San Bernardino — to pay every cent of what they owe to the California Public Employees’ Retirement System as those costs grow. “… I don’t think there is adequate discussion of how much those raises are going to be. I have heard other things, I think in this court, that it is an exponentially increasing number that will have to be paid in order to keep retirement plans intact. There comes a point where no matter what I confirm it will fail.”

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