LOS ANGELES — San Bernardino's pension obligation bond creditors urged the judge in the city's bankruptcy case, now in its third year, to set a March 1 deadline for a plan of adjustment.
"The time has come to fix a deadline for the city to file a plan and proceed to the plan phase of this case," attorneys for Ambac Assurance Corporation and Erste Europaische Pfandbrief-und Kommunalkreditbank AG argued in the
U.S. Bankruptcy Judge Meredith Jury has set a Nov. 18 hearing for arguments on the motion filed by Ambac and EEPK, referred to as the POB creditors in the documents.
A deadline may provide the city and its creditors with additional incentives to settle and minimize further delays detrimental to the city in the event that uniform creditor support is not obtained, according to Vincent Marriott III of Ballard Spahr, who represents EEPK, and Mark Angelov of Arent Fox, who represents Ambac.
"Even though the POB creditors remain committed to the mediation process, and have for the last two years been supportive of the city's efforts, they doubt that further progress will be made simply by allowing more time for the process," Marriott and Angelow said in the filing.
The POB creditors also noted that August 1, 2014 marked the second anniversary of the city's filing. Over that time, the POB attorneys said, the city has gained a meaningful understanding of its finance and its cash position, enabling it to create workable projections.
The city has engaged in extensive settlement discussions with all of its major creditors through a court-ordered confidential meditation, but has only reached a settlement agreement with the California Public Employees' Retirement System.
"The city's failure to reach a settlement with the POB creditors was particularly disappointing in light of the city's settlement with its staunchest opponent, CalPERS, while being unable to do so with creditors that have been proponents of the city's efforts," the POB creditors said in their filing.
While the terms of the CalPERS settlement are confidential, the city has resumed payments to the pension fund, but the city has not resumed payments to the POB creditors, even though the proceeds of the original POB issuance were turned over to CalPERS, according to the filing.
EEPK and Ambac, are respectively, the holder and insurer, of $50 million in pension obligation bonds issued by the city to refund the majority of the city's then unfunded actuarial accrued liability under its employee pension plans administered by CalPERS. Ambac insures approximately $14 million of the initial principal amount of the POBs.
"Even though the city has suspended the payment of debt service on the POBs during the pendency of the case, the POB creditors refrained from litigating with the city, in order to minimize the diversion of the city's resources from the important task of formulating a plan of adjustment," the POB creditors said.
Yet more than two years passed before the city engaged in mediation with the POB creditors on Aug. 5, the POB creditors said.
The city's tentative agreement with its police union has broken down and it has not reached an agreement with the firefighters' union.
The POB Creditors said their negotiations with the city "have likewise not been productive, although unlike with the fire union, they have not been acrimonious."
