San Bernardino Seal

By Ryan Hagen, The Sun
Posted: 03/29/16 – 9:15 PM PDT |

San Bernardino will pay the holders of its pension obligation bonds 40 percent of what they’re owed, reducing the total payments to one of its largest creditors by about $45 million, according to a settlement between the bankrupt city and those creditors.

The deal came after the city, which filed for bankruptcy in 2012, pushed for a year for a plan that would pay 1 percent to the bondholders. Meanwhile, those bondholders pursued a lawsuit to get something like the 100 percent repayment that the city agreed to for the California Public Employees’ Retirement System.

“The settlement will end the costly legal battles between the City and the settling creditors over confirmation of the City’s Chapter 9 Plan of Adjustment, as well as how much the creditors are to be paid,” City Attorney Gary Saenz said in a written statement.

Indeed, the last year of bankruptcy hearings have often featured a clash between “Wall Street” and the city, with a greater battle over the city’s plan to exit bankruptcy widely expected if some settlements weren’t reached.

According to the nine-page settlement agreement, those creditors — the Luxembourg-based bank known by its initials, EEPK, and Ambac Assurance Corporation — drop their litigation against the city and release it from any future liability related to the pension obligation bonds.

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