Bankruptcy Judge Chris Klein recently issued his formal confirmation opinion in Stockton’s Chapter 9 bankruptcy case. While there were no real surprises, the opinion makes for entertaining reading given the Court’s more than serious conclusion that:
Illinois Governor Rauner presented his turnaround agenda in his “State of the State” address last week and called for, among other things, the state “to extend to municipalities bankruptcy protections.” Mirroring the proposed legislation introduced by Representative Ron Sandack in January, and reported on in an earlier post, Illinois seems positioned to provide municipalities with clear and direct access to Chapter 9 bankruptcy and
Illinois’ municipal distress is severe and we have witnessed the political maneuvers to address Chicago’s ongoing fiscal dilemma. In 2013, Chicago Mayor Rahm Emmanuel stoked bankruptcy fears citing the city’s ballooning pension obligations that he estimated could exceed $1.6 billion in 2016. Pew Charitable Trusts has reported that among the nation’s five largest cities, Chicago has put aside the smallest portion of its looming pensions obligations. While certain changes have been made to counter the pension funding deficit, including Governor Quinn’s hotly contested
Say what you will about Detroit’s bankruptcy case, but when it is all said and done, the value for each of its participants most likely lies in the learning experience. And, experience is sometimes a painful teacher. One of the many take-aways is a framework for what constitutes a workable or“feasible” plan of adjustment (“Plan” or “Plan of Adjustment”) while recognizing the significant risk of implementation and post bankruptcy performance.
Detroit Highlights
NASA defines a black hole as a place in space where gravity is relentless and pulls so much that not even light can get out. And, so it goes with Chicago as it attempts to get out of its pension black hole. The recent Illinois Supreme Court opinion in Jones v. Municipal Employees’ Annuity and Benefit Fund of Chicago, 2016 IL 119618 (Ill. 2016) (“Jones”) may have created a wormhole or way through Chicago’s pension black hole. That way through is collective bargaining, as discussed below.
This is the first of several posts on gathering agreements in bankruptcy, covenants running with the land and rejection claims that arise when a debtor finds gathering agreements financially burdensome. As our readers know, we waited with much anticipation for theSabine ruling and wait with equal anticipation for the ruling on similar issues in QuickSilver. Being pragmatic business lawyers we decided to blog on what parties to gathering agreements should be doing now in light of the non-binding, advisory Sabine ruling.
San Bernardino’s Chapter 9 case is back in the news. On May 18, the City Council approved the City’s proposed exit plan for filing with the Bankruptcy Court in a 6 to 1 vote. San Bernardino’s plan is challenging to say the least and certainly consistent with Judge Jury’s January comment that “sometimes you have to get ugly to get pretty.” The plan reflects the City’s “Gordian Knot” of financial obligations to bondholders, employees and retirees, and the City’s need to deliver essential services to residents without raising taxes beyond the breaking point.
On February 6th, Federal District Judge Francisco Besosa ruled that Puerto Rico’s municipal debt-restructuring law, the “Recovery Act”, was unconstitutional stating that: “The Recovery Act is pre-empted by the federal Bankruptcy Code and is therefore void.” The Court also permanently enjoined current and future government officials from enforcing the Act. Puerto Rico has announced that it will be appealing the ruling.
Illinois’ municipal distress is severe and we have witnessed the political maneuvers to address Chicago’s ongoing fiscal dilemma. In 2013, Chicago Mayor Rahm Emmanuel stoked bankruptcy fears citing the city’s ballooning pension obligations that he estimated could exceed $1.6 billion in 2016. Pew Charitable Trusts has reported that among the nation’s five largest cities, Chicago has put aside the smallest portion of its looming pensions obligations. While certain changes have been made to counter the pension funding deficit, including Governor Quinn’s hotly contested
Say what you will about Detroit’s bankruptcy case, but when it is all said and done, the value for each of its participants most likely lies in the learning experience. And, experience is sometimes a painful teacher. One of the many take-aways is a framework for what constitutes a workable or“feasible” plan of adjustment (“Plan” or “Plan of Adjustment”) while recognizing the significant risk of implementation and post bankruptcy performance.
Detroit Highlights