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California pension fund objects in court to San Bernardino bankruptcy

Yahoo! News | by Tim Reid | October 25, 2012

America's biggest public pension system filed a formal objection on Wednesday to a quest by San Bernardino to seek bankruptcy protection, citing the "disarray" in the Californian city's finances.

San Bernardino, a city of 210,000 people 60 miles east of Los Angeles, declared bankruptcy on August 1. Since then it has halted pension payments to the powerful California Public Employee Retirement System (Calpers), its biggest creditor.

The case could set precedent in how local governments deal with soaring pension costs. In particular, it is setting the stage for a showdown between Calpers and Wall Street bondholders and bond insurers over how they are treated as creditors in a municipal bankruptcy.

Last week Calpers made clear in public statements it would not tolerate San Bernardino, or any other Californian city, missing payments into its fund. Since it declared bankruptcy, San Bernardino has missed six biweekly payments totaling over $6 million.

On the deadline day for creditors to file objections to San Bernardino's bankruptcy claim, Calpers filed a 20-page objection and 116 pages of exhibits.

 

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