STOCKTON (AP) — A major investment firm has challenged a court-approved bankruptcy plan for the California city of Stockton, possibly jeopardizing resolution of one of the country’s biggest city bankruptcies stemming from the 2008 housing bust.
Franklin Templeton Investments, an asset management firm based in San Mateo, filed an appeal Wednesday against Stockton’s bankruptcy deal.
City officials had successfully negotiated with creditors to eliminate more than $2 billion in long-term debt without cutting the city’s pension obligations.
Franklin Templeton was the only major creditor not to sign off on the settlement. The investment firm said the city should have cut employee pensions rather than scrub the $32.5 million it owed Franklin Templeton.
Federal bankruptcy judge Christopher Klein, in approving the bankruptcy plan last month, noted that the city had cut employee pay and benefits, and pensions for new employees. Klein said then the bankruptcy plan did not treat Franklin Templeton unfairly.
Stockton, a city of 300,000 people east of San Francisco, filed for Chapter 9 protection in 2012. It was the nation’s largest city in bankruptcy until Detroit filed bankruptcy last year.
City Manager Kurt Wilson said in a statement that the appeal was “neither surprising, nor alarming.”
Throughout the bankruptcy, “we faced an unprecedented level of opposition because we made unprecedented levels of difficult decisions,” Wilson stated.