A settlement for its municipal bankruptcy has already been agreed upon by the city of San Bernardino and its creditors. The city will have to pay 40 percent of the money it owes from its bondholders.
According to Reuters, San Bernardino had declared bankruptcy last 2012 with a debt of $45 million. Cities like Detroit and Stockton have also declared bankruptcy.
San Bernardino's situation was closely monitored by the $3.6 trillion U.S municipal bond market. The bondholders have pursued a lawsuit against the city claiming the 100 percent repayment that the city has agreed to pay for the retirement of California Public Employees.
Gary Saenz, the city's attorney, said the recent settlement, however, will end the costly dispute that has been going on between the city and its creditors as reported by Bloomberg. The nine-page settlement agreement states that creditors like the Luxembourg-based bank EEPK and the Ambac Assurance Corporation will drop its case against the city and will make the city free from any liability regarding pension obligation bonds in the future.
The agreement also states that the creditors will support the city's disclosure statement which is an amended version of the last statement that received objections from both parties. The city, on the other hand, will now be obliged to pay its debt in a 30-year period span which will start a year after U.S Bankruptcy Judge Meredith Jury approves the city's exit from bankruptcy. This time, the city will be allowed to have an additional investment in public safety worth $2 million per annum as per The Press-Enterprise.
Judge Gregg Zive mediated the current settlement which was also approved right away by the City Council before it adjourned last March 21. San Bernardino's debts started in 2005 when the city decided to issue bonds in order to pay its pension obligations to its investors.
