Moody's Investors Service lowered the pension obligation bonds of Stockton, California, to 'Ca' from 'Caa3' yesterday and changed its outlook on them to “negative” from “developing,” citing how the city would treat the debt in its plan for exiting bankruptcy, Reuters reported yesterday. "For the series 2007 pension obligation bonds, the city is proposing significant losses to bondholders," Moody's said in a statement, noting that it now estimates losses to be in a range of 50 percent to 65 percent of principal from the date the city first defaulted on the debt. "While better than the city's initial proposal of losses of around 80 percent, the projected losses are somewhat greater than had been implied at the former Caa3 rating level," Moody's said, noting the losses would accrue to bond insurer Assured Guaranty rather than to bondholders. Stockton has settled with Assured and bond insurers Ambac and National Public Finance Guarantee Corp. and is trying to reach deals with a handful of remaining creditors to support its plan to adjust its debt and exit from bankruptcy.
