SAN FRANCISCO — The judge in Stockton, Calif.'s municipal bankruptcy case denied a request from the city's holdout creditor to increase the amount it would receive on its claim.
Last month Franklin Advisors filed an appeal challenging U.S. Bankruptcy Judge Christopher Klein's confirmation of the city's plan of adjustment and asked the judge to put a stay on the plan's implementation until the appeal is heard.
During a hearing on Wednesday, Klein ruled against Franklin on one point, but said he would wait to hear arguments on Franklin's bid for a stay until Stockton's plan becomes effective.
Franklin had objected to taking a significant loss on the $35 million of bonds it holds-a recovery rate it estimated amounts to about 1%-when the California Public Employees' Retirement System remained untouched.
Other major creditors settled with the city ahead of the October bankruptcy confirmation.
Franklin was grouped in a class of creditors with city retirees who are set to receive a similar recovery rate. The city's bankruptcy exit plan eliminated future health benefits for retirees, which would save an estimated $545 million for the city.
Franklin said that if the retiree health benefits claim was discounted to present day value, the true savings would double.
Klein said he was not required to discount the claim and denied Franklin's request.
Stockton attorneys said on Wednesday that the bankruptcy exit plan would become effective within three weeks.
