Central Falls, R.I., tweaks unsecured claim treatment in amended plan

By Caroline Salls

Pittsburgh, June 18 - The City of Central Falls, R.I., filed an amended Chapter 9 plan of adjustment of debts and related disclosure statement Friday with the U.S. Bankruptcy Court for the District of Rhode Island.

Central Falls said in the disclosure statement that the proposed plan "will restructure the city's debt and its operations and put the city on a path toward fiscal stability."

According to the disclosure statement, the amended plan also addresses and resolves the city's obligations to current and former employees; the city's obligation to pay pension benefits and to pay for other post-employment benefits for its current and future retirees; the claims of former employees who were not paid the full amount of accrued sick time and other benefits; the claims arising from tort and breach of contract lawsuits; and various other trade and vendor claims.

Central Falls said the amended plan does not impair the city's bond obligations.

Holders of general unsecured claims and general unsecured convenience claims will receive a distribution from a $600,000 pool during a six-year "plan horizon." Under the original version of the plan, these creditors were slated to receive distributions from a $613,147 pool during a five-year plan horizon.

Specifically, according to the amended statement, the general unsecured convenience creditors will be paid for 35% of their claim by June 30, 2013, up from 50% under the previous plan.

Any balance remaining in the fiscal year 2013 claims pool will be added to the fiscal year 2014 claims pool.

The general unsecured creditors will share in the claims pool on the June 30, 2014; June 30, 2015; June 30, 2016; and June 30, 2017 payment dates. However, the city said the amount paid to any general unsecured creditor will not exceed 45% of the allowed claim.

If any money remains in the general unsecured creditors' pool on June 30, 2017 after the specified distribution, that money will be deposited in the city's capital fund.

The city said it lacks the revenues to pay a higher percentage to unsecured creditors while maintaining an adequate level of municipal services, including fire and police protection and street repairs.

Creditor treatment

According to the disclosure statement, treatment of creditors will include the following:

• Administrative claims holders will be paid in full;

• Principal and interest on general obligation school bond claims and G.O. municipal facility bond claims will be paid via property tax proceeds;

• The term of the city's April 10, 2009 rescue lease will be extended by two years, the annual principal payments will be reduced by 50% and the annual interest rate will be reduced by 1%;

• Retiree health insurance claims holders' health care benefits will be modified and they will be required to pay 20% co-share premium payments;

• Retiree accidental disability claims holders' benefits will be modified;

• Retiree pension claims holders' annual pension benefits will be reduced by less than 55% in accordance with the formula set under the newly designed Central Falls Pension Plan;

• Employees covered by collective bargaining agreements with Local 1485, International Association of Fire Fighters, AFL-CIO, the Fraternal Order of Police, Lodge 2 and R.I. Council 94, AFSCME, AFL-CIO Local 1627 will have their compensation, health and other benefits reduced, while firefighters and police will also see their retirement benefits reduced;

• General unsecured claims holders will receive their share of the $600,000 pool during the six-year plan duration after distributions are made to or reserves are created for the holders of convenience unsecured claims; and

• General unsecured convenience claims holders will recover 35% in one lump-sum payment by June 30, 2013.

Central Falls filed for bankruptcy on Aug. 1. Its Chapter 9 case number is 11-13105.

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