Reuters: Bankruptcy News: Stockton, Calif., creditors extend mediation period

Reuters: Bankruptcy News Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

Stockton, Calif., creditors extend mediation period May 22nd 2012, 01:58 SAN FRANCISCO | Mon May 21, 2012 9:58pm EDT SAN FRANCISCO May 21 (Reuters) - Stockton, California and its creditors have agreed to extend a mediation period intended to help the city avoid having to file for bankruptcy, its mayor said on Monday. The two sides will enter into a 30-day extension of talks through June 25 as the end of their 60-day confidential mediation period is drawing to a close. "This is a good sign," Mayor Ann Johnston said in a statement. "It means that our creditors understand our fiscal circumstances and indicates that they believe that it is worth the investment of time and resources to work toward a solution." Johnston last week said city officials are hopeful they can avoid a municipal bankruptcy filing for Stockton, the first big city in California to test a new law requiring pre-bankruptcy mediation after its leaders in February endorsed a restructuring plan for the city's finances. The law requiring mediation followed Vallejo, California's controversial bankruptcy filing in 2008. Vallejo emerged from bankruptcy last year. In addition to mediation, Stockton's financial restructuring plan includes defaulting on some debt payments during the remainder of the current fiscal year through June. Rating agencies have slashed Stockton's credit rating in response and State Controller John Chiang's office is investigating the city's financial practices. Sloppy bookkeeping contributed to Stockton's financial troubles along with a severe slump in revenue after the local housing market collapsed, according to city officials. They also blame state raids on Stockton's coffers, too much city debt and providing city workers with high pay and generous benefits in retirement for the city's financial troubles. Stockton's budget gap is now projected to be in the range of $26 million to $43 million, compared with a prior estimate of a deficit in the range of $20 million and $38 million. Stockton, located about 85 miles east of San Francisco, has cut more than $90 million over the past three years and city officials have said they are reaching a point where they can not cut much more without endangering public safety. To bolster Stockton's finances, the officials are seeking concessions from the city's creditors, which includes bond insurers, city workers and retired city employees. If concessions are insufficient to help balance Stockton's books, a Chapter 9 bankruptcy filing remains an option for the city. (Reporting by Jim Christie; Editing by Eric Walsh) Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions