LOS ANGELES— If the California Public Employees’ Retirement System prevails in having courts define San Bernardino’s obligations to the pension fund as immutable in the city’s bankruptcy case, it could have widespread ramifications including sweeping bond downgrades, according to Matt Fabian, managing director of Municipal Market Advisors.

“With recent rating agency actions taking a dimmer view on California general fund obligations generally, we suspect success by CalPERS would trigger sweeping downgrades across the state,” according to an MMA market outlook report co-authored by Fabian. “We also assume a strong pullback by lenders, perhaps exceeding the rating impact, implying steep funding costs for issuers attempting to sell new lease debt.”

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