Moody's Investors Service said that the city of Stockton, Calif., faces a growing likelihood of defaulting on some of its debt obligations as the conclusion of confidential talks with its creditors aimed at averting bankruptcy nears, Reuters reported yesterday. Stockton is in mediation with its creditors, trying to obtain concessions to help close a $26 million budget gap before the July 1 start of its new fiscal year. Stockton is the first big city in California to test a new law requiring mediation after its leaders in February endorsed a restructuring plan for the city's finances. Stockton's restructuring plan includes mediation and, to the shock of many in the U.S. municipal debt market, defaulting on some debt payments during the remainder of the current fiscal year through this month. Rating agencies have slashed Stockton's credit rating in response and the state controller office is investigating its financial practices.
