LOS ANGELES — The insurance companies liable for bond debt in the San Bernardino, Calif. bankruptcy expect to begin earnest discussions about the fate of that debt soon.
They've been waiting their turn while the pension fund and city unions have engaged in mediation with the city.
Within the next few months, the city will begin negotiations with Ambac Assurance Company and National Public Finance Guarantee Corp. on bonds the city defaulted on after it declared bankruptcy in August 2012, according to court filings.
The city and Ambac have agreed to begin negotiations regarding the treatment of the pension obligation bonds under a Chapter 9 exit plan, and are presently scheduling meetings with the mediator, according to a July 11 filing. Ambac, the insurer of the city's POBs, has been participating in the confidential mediation for itself, Erste Europäische Pfandbrief-und Kommunalkreditbank AG, the holder of the pension obligation bonds, and Wells Fargo Bank, N.A., the POB trustee, according to the filing.
NPFG insures two lease revenue bonds and one sewer revenue bond issued by the city.
"The city has had discussions with NPFG and continues to provide financial information, but the parties have not yet begun negotiations regarding the treatment of the bond claims under a chapter 9 plan," according to a status update filed by Paul Glassman, lead attorney representing the city and a partner with Santa Monica, Calif.-based Stradling Yocca Carlson Rauth, P.C.
The city expects those negotiations to begin in about 60 days, according to the filing.
San Bernardino reached an interim agreement with the California Public Employees' Retirement System on June 19, but the details of the agreement have still not been released, even though the city passed a budget on June 30.
The San Bernardino firefighters union asked to be released from the mediation shortly after CalPERS reached an agreement, saying the confidential nature of the mediation was preventing the union from protecting employees in budget negotiations. U.S. Bankruptcy Judge Meredith Jury agreed.
CalPERS had been the most combative of the city's creditors. The city's police and fire unions are the only two of the city's seven unions that have been involved in the bankruptcy proceedings.
The confrontations between the city and CalPERS and between the city and its unions have overshadowed city bond debt.
The city hasn't made payments on its pension obligation bonds since it filed bankruptcy in August 1, 2012, according to filings on the Municipal Utilities Rulemaking Board's EMMA website.
As of June 30, 2012, the city had bonded debt outstanding of $81 million and additional debt of $116.1 million, according to the 2011 audited financial report, its' most recent. Bonded indebtedness included $46.1 million of pension obligation bonds and $25.1 million certificates of participation.
The city's official long-term liabilities were reduced by the statewide dissolution of redevelopment in 2012, according to its audited financial report for fiscal 2012.
About $130 million of tax allocation bonds were transferred to the redevelopment successor agency, which is not included as part of the government-wide statements, according to the CAFR.
