Setting up a possible showdown with CalPERS, two bond firms are reviving their legal campaign to win a bigger share of the money being doled out by bankrupt San Bernardino.
Luxembourg bank EEPK and bond insurer Ambac Assurance Corp. filed appeal notices to the U.S. Bankruptcy Court Appeals Panel this week challenging San Bernardino’s decision to pay its full pension obligations to CalPERS. Their lawsuit was dismissed last month by U.S. Bankruptcy Judge Meredith Jury.
The two companies would recover 1 percent of an estimated $59 million debt under San Bernardino’s plan. They say it’s unfair to pay CalPERS its full annual payment, which exceeds $24 million a year, while repaying them next to nothing.
A similar fight played out in Stockton’s bankruptcy last October, with pensions emerging unscathed. The judge said Stockton had the legal right to scale back its payments to the California Public Employees’ Retirement System. But he approved the city’s plan to pay CalPERS in full, over the objections of a bond firm.
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San Bernardino officials, like their counterparts in Stockton, said they have to preserve their relationship with CalPERS or risk losing municipal employees in droves.