Reuters: Bankruptcy News: No release of details of Stockton bankruptcy talks

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No release of details of Stockton bankruptcy talks Jul 6th 2012, 21:19 SACRAMENTO, Calif., July 6 | Fri Jul 6, 2012 5:19pm EDT SACRAMENTO, Calif., July 6 (Reuters) - Stockton, California may not immediately disclose details of the city's pre-bankruptcy talks with creditors during the opening rounds of its Chapter 9 bankruptcy case, the judge overseeing it said on Friday during its first hearing. "I am not of a mind to just open up the books," Judge Christopher Klein said during the hearing in U.S. Bankruptcy Court in Sacramento, California. Stockton may, however, reveal "The Ask," the nickname its lawyers have given the city's proposals to creditors during its three months of confidential talks with them, said Klein. Stockton, a city of 300,000 in California's Central Valley, last month filed for Chapter 9 bankruptcy protection from its creditors after lengthy confidential talks with its creditors failed to produce concessions to help it close a $26 million budget gap. Stockton is the most populous U.S. city to file for bankruptcy, a controversial move city leaders say was unavoidable given the city's severe revenue slump, high debt burden and expensive benefit obligations to its employees and retirees. After slashing more than $90 million in spending in recent years to a point where city officials say further cuts would endanger public safety, Stockton's bankruptcy plan aims for bondholders and its employees and retirees to suffer losses to help bolster the city's finances. The city has proposed defaulting on bond payments, cutting employee compensation and scrapping lifetime medical benefits for retired employees as cost-savings moves. Bondholders, bond insurers, city unions and retirees are preparing to fight Stockton in bankruptcy court but at the first hearing of the city's case they agreed with the city's legal team to Klein's plan for its first steps. Those steps include a July 20 deadline for Stockton to explain why it should be eligible for bankruptcy - which one of the city's bond insurers has hinted it will contest - followed by an Aug. 9 deadline for objections. Stockton's legal team and the city's creditors will then meet again in Klein's chambers on Aug. 23 for a hearing on sharing information. "We'll make it work," said Marc Levinson, the lawyer leading Stockton's legal team. Levinson, who represented Vallejo, California, during its three years in bankruptcy from 2008 to 2011, had hoped to lay out as much information as possible about Stockton's talks with its creditors. But Klein said he favored an incremental approach, noting he did not want details of the give and take of the negotiations made public initially. Klein said it would be vital to encourage ongoing talks between the city and its creditors so any deals could speed bankruptcy proceedings if he deems Stockton eligible for Chapter 9 protection. Confidential talks between financially distressed municipalities considering bankruptcy and their creditors are required ahead of a bankruptcy filing as the result of state legislation approved in the wake of Vallejo's bankruptcy filing. Levinson noted Stockton has reached tentative agreements with two of its unions since filing for bankruptcy that may help the city's finances. The deals are expected to be ratified by the end of the month. This case is In re: City of Stockton, California, Debtor in U.S. Bankruptcy Court, Eastern District of California, Sacramento Division (Case No. 2012-32118) Link this Share this Digg this Email Reprints

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