SAN BERNARDINO, Calif., May 14 (Reuters) - The Southern California city of San Bernardino wants to repay its pension bondholders just a penny on the dollar while paying the state pension fund Calpers in full under its long-awaited bankruptcy exit plan released on Thursday.
Under the bankruptcy plan, called a plan of adjustment, San Bernardino also intends to virtually eliminate retiree health insurance costs, and outsource its fire, emergency response and trash services.
San Bernardino proposes paying the Luxembourg-based bank EEPK, holder of $50 million in pension obligation bonds and the city’s second largest creditor, a fraction of its original debt, according to the plan, posted on the city’s website.
EEPK, along with Ambac Assurance Corp, which insures a portion of the pension bonds, and Wells Fargo, the bond trustee, have the $50 million principal amount of their debt slashed to just $500,000, or a penny on the dollar, under the bankruptcy plan.
San Bernardino, a city of 205,000 that is 65 miles east of Los Angeles, declared bankruptcy in July 2012 with a $45 million deficit. Along with Detroit, Michigan and Stockton, Calif., its bankruptcy is one of a handful that have been closely watched by the $3.6 trillion U.S. municipal bond market
San Bernardino’s bankruptcy blueprint follows the approach taken in the recent bankruptcies of Detroit and Stockton where bondholder debt and retiree healthcare costs were slashed or eliminated, while pensions emerged relatively unscathed.
Reporting by Tim Reid; Editing by Bernard Orr