San Bernardino third amended plan of adjustment confirmed by court

By Caroline Salls

Pittsburgh, Feb. 8 – The City of San Bernardino, Calif.’s third amended Chapter 9 plan of adjustment was confirmed Tuesday by the U.S. Bankruptcy Court for the Central District of California.

As previously reported, the plan is based on settlements reached with most of the city’s principal creditors.

Among the settlements reached with creditors are an agreement with the California Public Employees’ Retirement System (CalPERS) regarding the city’s continued funding of employee pension benefits; a settlement with the official retiree committee appointed in San Bernardino’s case regarding the continued funding of retiree pensions and the restructuring of retiree health benefits; settlements with the police, firefighters and other employee unions; and settlements with the holders of city-issued bonds.

San Bernardino said it also now plans to annex into the San Bernardino County Fire Protection District and have county fire provide fire suppression and emergency medical response services instead of the current city fire department.

Creditor treatment

Under the plan, the city will distribute 1% to holders of general unsecured claims.

Holders of refunding bond claims and refunding certificate of participation claims will be paid in accordance with relevant indentures and trust agreements.

Harriman project and pavement project secured claims will be paid in accordance with related project financing documents.

The collateral securing the city’s payment obligations under a Police Station AC financing agreement will be relinquished to Western Alliance, and the city will have no further obligation under the financing agreement. Western Alliance will have a general unsecured claim for any unpaid amounts due under the financing agreement.

Burgess secured claim documents will be amended to extend the maturity date until 2022, and a balloon payment will be amortized over that three-year period.

The city will continue to apply restricted revenues to pay restricted revenue bond and notes payable obligations in the ordinary course of business.

CalPERS will be paid in accordance with a settlement, which provides for payment of some arrearages and additional administrative costs to CalPERS and a covenant not to impair CalPERS under the plan.

In connection with the claims of Public Agency Retirement System (PARS) participants under PARS plans, the city proposes rejection of the PARS plan and a waiver by the city of any and all claims to the funds held within specified trusts as of the date of termination of the PARS plans. Also, the city will make a distribution of $290,000 on the later of the plan effective date or July 5, 2017 and a distribution of $290,000 on the later of the effective date or July 5, 2018 to PARS participants.

Under a pension obligation bond settlement, the city will make installment payments over a 30-year term, starting one year after the plan is confirmed. The city will make payments of $1 million to $2.5 million per fiscal year until 2046 instead of the $3.3 million to $4.7 million per fiscal year owed under the terms of the 2005 pension bond agreement.

Holders of convenience class claims will receive the lesser of the amount of their claim and $100.

San Bernardino filed for bankruptcy on Aug. 1, 2012. The Chapter 9 case number is 12-28006.

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