Municipal Market Advisor’s analyst Matt Fabian in a report today sized up Stockton’s “ask,” which the city recently entered into evidence in support of its bankruptcy case. This behemoth document spelled out what Stockton sought in concessions in AB506 from its bond investors, current employees and retired city employees.
Fabian summed it up thus, calling it at first a “horrendous proposal”:
The city had requested that $65MM of bonds across 3 series see princiapl delayed for 10 years, amortization stretched to 2052, and interest rates reduced drastically. It also wanted fully 83% write-down of its $124MM pension obligation bonds and the removal of any General Fund obligation on $46MM of principal in two other series. This is the issue; because debt overload is not a prime mover in Stockton’s fiscal crisis, the associated debt relief it needs to make the savings meaningful (and worth the catastrophic loss of market access such repudiations warrant) are enormous.