Posted on 03/19/2015 7:32:02 AM PDT by C19fan
The southern California city of San Bernardino has defaulted on nearly $10 million in payments on its privately placed pension bond debt since it declared bankruptcy in 2012, according to documents seen by Reuters.
In addition, the city has not negotiated with its bondholders since September, according to a person familiar with the stalled negotiations.
The missed payments illustrate the trend among cities in bankruptcy to favor payments to pension funds over bondholder obligations, which has increased the hostility between creditors and municipalities.
(Excerpt) Read more at reuters.com ...
De-fault is in our stars, Brutus (with apologies to Shakespeare.)
Can’t wait to relocate to San Bernardino..it must be great to live there...
I’ve heard that these pension defaults are on the horizon all over the country. I’ve heard that unfunded liabilities total into the hundreds of billions of dollars.
We’ve heard about real estate bubbles and stock market bubbles and such, but haven’t heard too many talk about the pension bubble which will burst. And it will burst, as so many baby boomer employees of these governments are retired and collecting benefits. Or will retire in the next 5 to 10 years.
Pensions are paid to people who worked for them
Bond holders know they are at risk when investing and seek out returns commensurate with that risk.
I wouldn’t lend them one dime on an unsecured bond. They would have to put up a first deed of trust on a piece of property that I wanted or they could go pound sand. I don’t understand how the courts can put CALPERS ahead of everyone else. Any one who lends to a municipality is taking a horrible risk.
Close, but public pensions are paid for by taxation. The reason municipal bonds are rated the way they are is the municipality has the ability to raise taxes to meet their obligations. By failing to meet obligations when monies are available is unlawful, and immoral.
In this case, the municipality well outspent their incoming revenue. They are obligated to pay their creditors first, by law.
When companies go bankrupt (see the airlines), the pension obligation falls to the PBGC (Pension Benefit Guaranty Corporation), an agency of the US Govt. The PBGC then becomes liable for paying at least some portion of the pension.
When municipalities go bankrupt, they continue to collect taxes, though not at a rate to cover debts. They need to work with all creditors to reorganize their debt. But to just not make a payment is plain wrong.
I don’t understand how the courts can put CALPERS ahead of everyone else.
They didn’t, the court gave them permission to give CALPERS a Big Haircut, the City decided to make CALPERS whole and give everyone else the haircut. There is a lawsuit on this already by some other bond holders.
As there should be. They should have their ass handed to them.
Which is why they are headed back to bankruptcy, just like everyone said would happen if they continued to pay the very people that forced them into bankruptcy in the first place, Public Employee Unions.
Coming soon to a City near you
“Pensions are paid to people who worked for them
Bond holders know they are at risk when investing and seek out returns commensurate with that risk.”
Yeah, but when they raid the whorehouse, they take the piano player too. PE pensions are due for a huge haircut. I mean after they screw the bond holders and still have no money, just who’s going to be next? Plus, here in CA (Stockton) the courts have already said that pensions can be cut in a municipal bankruptcy, so it WILL happen. Taxpayers are about done with overpaying PE’s both during their “working lives,” and in retirement.
“I wouldn’t lend them one dime on an unsecured bond. They would have to put up a first deed of trust on a piece of property that I wanted or they could go pound sand. I don’t understand how the courts can put CALPERS ahead of everyone else. Any one who lends to a municipality is taking a horrible risk.”
CalPers has already been told by CA courts that they are going to have to get in line with other creditors in municipal bankruptcies.
Ill go with Illinois to be first, with NJ 6-8 months later
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