Monday, January 24, 2011

Vallejo, California Creditors Likely to Get Only 5 Cents to 20 Cents on the Dollar

Vallejo, California officials, where the city is in the process of filing a bankruptcy plan, say that the plan calls for some creditors to only get between 5 cents and 20 cents on the money owed to them, reports NYT.

Mayors gathering in D.C. for the winter meeting of the United States Conference of Mayors, according to NYT,  expect more cities, mostly smaller cities, to seek bankruptcy or possibly even default on their loans.

As for the biggies, NYT reports that Mayor Antonio R. Villaraigosa of Los Angeles disputed a prediction made last year by one of his predecessors, Richard J. Riordan, that Los Angeles’s pension problems would be likely to drive the city into bankruptcy. Saying “there’s no question you will see some cities that default,” he insisted that Los Angeles would not be one of them.

“There is no scenario where we would ever be in the ‘B’ situation,” he said. “I don’t even use that word, because we’re going to make the tough decisions.”

Huh. I'm filing Villaraigosa's comment under "Nothing is confirmed until officially denied."

I repeat, be careful of muni bonds. And if you do business with city or state governments be careful of the credit lines you extend.

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