Stockton, Calif., is preparing a plan for adjusting its debt that it will unveil in September even as negotiations with its creditors press on, Reuters reported yesterday. The cramdown plan would be filed despite objections by Stockton's creditors, notably bondholders led by bond insurers Assured Guaranty and National Public Finance Guarantee. Bondholders and insurers contest Stockton's different treatment of pension and debt payments — an issue that could eventually find its way to the U.S. Supreme Court. A majority of creditors and two thirds in amount of claims within each class of claims impaired under the plan must vote to approve it, and Hon. Christopher Klein will ultimately decide if it meets other bankruptcy law requirements to go into effect. In April, Judge Klein approved Stockton's petition for bankruptcy, a setback for its capital markets creditors, which had contested the city's bid for bankruptcy eligibility. They object to Stockton's payments into the state pension fund. Judge Klein has said that the issue of pension payments may be reviewed after Stockton files its plan to adjust its debt.
