SACRAMENTO – Stockton, Calif., in the midst of Chapter 9 bankruptcy proceedings, announced Tuesday that it had reached an agreement with Ambac Assurance Corporation.
Of the three bond insurers with exposure to the city, which filed for bankruptcy in 2012, Ambac has the smallest.
Ambac has kept a low profile as the other two bond insurance creditors, Assured Guaranty Corp. and National Public Finance Guarantee, challenged the city’s eligibility for bankruptcy and its approach to the bankruptcy process.
“After several months of confidential negotiations, we have reached a mutually beneficial agreement that addresses $21.6 million in debt payments and provides both near term General Fund relief and predictability and will serve as an important step to enabling the City to emerge from bankruptcy and reach fiscal sustainability,” said City Manager Bob Deis in a statement.
The Ambac deal is Stockton’s first with a capital markets creditor, the city says.
The agreement with Ambac places a cap on the amount of money that could be paid each year out of the city’s general fund, provides for use of the reserve fund to pay some of the debt obligation and, if necessary, extends the term of repayment, according to the city’s news release.
“The City greatly appreciates Ambac’s willingness to work with us toward a mutually acceptable agreement,” Deis said. “Rather than responding with an unreasonable and expensive, litigation-intense strategy, as some creditors have done, Ambac diligently worked with the City to achieve a consensual resolution. The result is a restructuring outcome that helps the City regain fiscal sustainability while meeting Ambac’s business needs, and avoiding hundreds of thousands of dollars in potential litigation expenses for both sides.”
Ambac insured certificates of participation issued in 2003 to finance affordable housing projects within the city. About $13.3 million was outstanding in 2010, according to city financial statements.