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  #111  
Old 03-28-2012, 12:46 PM
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http://abcnews.go.com/US/wireStory/d...5#.T3NAFTFQ5id

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Faced with a mountain of debt and burdensome union contracts, Detroit's financial predicament appears similar to the one General Motors and Chrysler confronted during the economic meltdown. However, while the motor companies received a bailout, the Motor City likely will not.

Although state and city leaders say they're close to a compromise that would prevent the appointment of an emergency manager to take over the reins of city government, the deal would only give Detroit resources and support from state officials in Lansing — not cash. The automakers got a major boost from the U.S. government on their way back to profitability.

Thus, while Detroit's elected leaders would remain in charge, the challenges the city still faces are massive as it suffers from declining revenue based partly on an ebbing population. The city is saddled with $13.2 billion in long-term obligations — including $5.5 billion in future medical liabilities — and $2.5 billion general fund debt. It's at risk of running out of cash by the end of May.
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  #112  
Old 04-08-2012, 10:32 AM
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http://www.nytimes.com/2012/04/01/us...-era.html?_r=2

Quote:
Attempts to plug budget holes with one-time transactions are giving way to other approaches, Mr. Stanton said. The conference was devoted to a discussion of the strengths and weaknesses of the more powerful tools being used in many cities these days, including receiverships, emergency declarations and even bankruptcy.

New woes were unfolding elsewhere even as a capacity crowd of government officials, investors, lawyers and credit analysts were gathering here to discuss the trend.

In Jefferson County, Ala. — which filed the biggest Chapter 9 municipal bankruptcy in American history this fall after its sewer-construction financing fell apart and a court threw out one of its taxes — county commissioners were voting to default on a general obligation bond payment.

In Detroit, city and state officials were sparring over how much emergency aid the city might be able to get, and how much state oversight and control would accompany it.

Stockton, Calif., was in negotiations in a last-ditch effort to avoid becoming the biggest American city yet to declare bankruptcy. And just two hours west of Philadelphia, Harrisburg, the state capital, recently announced that it would default on a payment coming due to general obligation bondholders.
....
But Robert G. Flanders Jr., the state-appointed receiver for Central Falls, R.I., said his city’s declaration of bankruptcy had proved invaluable in helping it cut costs. Before the city declared bankruptcy, he said, he had found it impossible to wring meaningful concessions out of the city’s unions and retirees — who were being asked to give up roughly half of the pensions they had earned as the city ran out of cash.

“The municipality is on bended knee asking the retirees and unions to come to the table and give up their contract rights,” he recalled. “All of that leverage shifts once you have the gumption to pull the Chapter 9 trigger. And guess what? That produces agreements quicker and more effectively than otherwise.”
....
Naomi Richman, a managing director at Moody’s Investors Service, wondered aloud whether it might become more acceptable for cities to declare bankruptcy.

“Back in the ’80s, the stigma against corporate bankruptcy fell away, and it became viewed as a strategy a corporation might pursue for various reasons,” Ms. Richman said. “Recently, with the residential housing collapse, individual bankruptcy has less of stigma in society — it’s a strategy that a person might be advised to follow if they have a debt that they can’t afford. Could the same thing happen for municipal bankruptcy?”
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  #113  
Old 04-08-2012, 10:44 AM
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Mish posted on that NYT article:
http://unionwatch.org/bankruptcy-the...public-unions/

Quote:
Bondholders and Unions Should Both Share the Pain

This idea that bondholders should not take losses is ludicrous. Anyone stupid enough to buy Detroit bonds should pay a hefty price. Moreover, since untenable promises made to public unions are generally a leading cause of bankruptcy, public unions should suffer as well.
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  #114  
Old 04-13-2012, 09:51 AM
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http://www.investmentnews.com/articl...edate=20120412

Quote:
The outcome of several bankruptcy proceedings, however, could change the default landscape dramatically, said David Dubrow, a bankruptcy lawyer at Arent Fox LLP.

Jefferson County, the largest county in Alabama, filed for Chapter 9 bankruptcy protection in November and is currently arguing in court for the right to cut payments on more than $3 billion in bonds issued to fund its sewer system. Harrisburg, Pa., filed a month earlier because of massive debts from an incinerator project. Stockton, Calif., may soon become the largest city to declare bankruptcy in U.S. history. It currently is in a 60-day mediation period.

If these issuers come out of their situations in better condition, it could encourage other stressed municipalities to follow suit. “If some of these entities are successful in restructuring collective bargaining agreements and paring their debt, it may become more acceptable for others to try — and we'll see more bankruptcy filings,” Mr. Dubrow said.

Certainly, the stress on municipal issuers is getting worse.

Local governments' two major sources of revenue — income taxes and property taxes — have been hit by the weak economy and the collapse in real estate prices. And the liability side of the equation looks even worse, with huge obligations such as Medicaid, employee health care and pension costs becoming increasingly hard to meet. With post-crisis stimulus spending by the federal government petering out and austerity measures likely around the corner, the fiscal problems will get crammed down on local governments still further.
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  #115  
Old 04-13-2012, 04:47 PM
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Score!

http://www.investmentnews.com/articl...edate=20120413

Quote:
Wells Fargo & Co., in a lawsuit it filed as a bond trustee against financially ailing Stockton, California, was awarded possession of three parking garages.
So WF now owns some parking garages in a bankrupt town. Sounds like an awesome deal there.
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  #116  
Old 04-14-2012, 11:20 PM
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Originally Posted by campbell View Post
Score!

http://www.investmentnews.com/articl...edate=20120413



So WF now owns some parking garages in a bankrupt town. Sounds like an awesome deal there.
clearly a deal they did not want to lose!
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  #117  
Old 04-18-2012, 10:30 AM
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http://mobile.reuters.com/article/id...20417?irpc=932

Quote:
More U.S. cities set to enter default danger zone
Tue, Apr 17 16:43 PM EDT
By Michael Connor

April 17 (Reuters) - America's swelling ranks of fallen municipal borrowers have been blamed in the past year on 'what-were-they-thinking' causes, be it a Taj Mahal sewer system in Alabama or an overpriced trash incinerator in Pennsylvania's capital city of Harrisburg.

But the next series of major cities and counties in danger of defaulting on their debt can hardly point to one single decision for their malaise. Whether it be Detroit, Miami or Providence, Rhode Island, their problems have a lot more to do with financial policies that put them on course to live well beyond their means.

Municipal defaults have shot up since 2007 and are on pace for another high year in 2012, according to Richard Lehmann, publisher of the Distressed Securities Newsletter.

Many failures will be due to local politicians' willingness to give unionized local government workers lucrative pensions and health care benefits when times were good. For others, the housing bust was enough to destroy their real estate tax base. They almost all share the failure to prepare for a rainy day.
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  #118  
Old 06-27-2012, 08:44 AM
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There goes Stockton
http://sacramento.cbslocal.com/2012/...cy-protection/

Quote:
STOCKTON (CBS13) – A source confirmed with CBS13 on Tuesday prior to the City Council meeting that Stockton will indeed file for Chapter 9 bankruptcy protection, becoming the largest U.S. city to do so.

City leaders were unable to reach an agreement with creditors on $26 million in debt. It had a deadline of midnight Monday. It must pass a balanced budget by July 1, so the city voted 6-1 late Tuesday night on a pendency plan for a day-to-day operating budget as it moves forward with bankruptcy. Only Councilman Dale Fritchen opposed.

“I am not convinced there isn’t anything else we can do,” Fritchen said before the vote. “We keep our promises until we can’t. We haven’t done everything.”

The city is expected to officially file for bankruptcy in federal court some time this week.
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  #119  
Old 06-27-2012, 08:59 AM
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Looks like Meredith Whitney's prediction is coming true although it was just a bit early. I imagine that this will start to become more common as a precedent is set.
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  #120  
Old 07-03-2012, 10:02 AM
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Harrisburg's day of reckoning has been pushed off for a few months
http://www.reuters.com/article/2012/...8610S420120702

Quote:
City leaders in Pennsylvania's cash-strapped capital Harrisburg who wanted to keep open the option to seek bankruptcy protection for the city of 50,000, were thwarted by state legislators over the weekend who extended the bankruptcy filing ban until November 30.

"The legislature made a decision," Governor Tom Corbett told reporters late on Saturday after signing the bill and Pennsylvania's new $27.7 billion budget into law.

"Harrisburg's problems need to be addressed and we will provide whatever help we can to the receiver in an appropriate form under the law."

The ban is the latest chapter in the city's battle with the state and within the ranks of the city's own officials, to retain control of its finances. It has been struggling under some $320 million of debt stemming from expensive upgrades and repairs to its trash incinerator.
....
ALL WANT BANKRUPTCY OPTION

Harrisburg officials are still fighting the constitutionality of the receiver's presence saying that his appointment by Pennsylvania and Governor Corbett's unfettered powers violates the U.S. Constitution.
....
Mark Schwartz, the attorney who filed the city's first bankruptcy missive, called Corbett's action hypocritical.

"There is not one cent for the city of Harrisburg (in Pennsylvania's new budget) and now the extension of the ban. They are simply putting their fingers in a dam," Schwartz said. "We'll see the fiscal equivalent of the (1889) Johnstown Flood thanks to the lack of state leadership."
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