The bankrupt city of San Bernardino, California, is being sued by holders of its pension bonds in a challenge to last year’s ruling in favour of the California Public Employees’ Retirement System (CalPERS).
CalPERS had successfully argued that San Bernardino should meet its payments to the $300 billion pension before paying other creditors, but two investors that lost out have challenged the agreement.
New York-based Ambac Assurance and EEPK, part of Germany’s Commerzbank, are owed more than $59 million, according to the Sacramento Bee. The firms claim their holdings in pension obligation bonds—issued specifically to help fund municipal pensions—should be paid alongside CalPERS.
CalPERS has not been named in the lawsuit but is reviewing the case, a spokesperson told Bloomberg.
The case echoes that of Stockton, California, which, like San Bernardino, declared Chapter 9 bankruptcy in 2012. Last year, a judge ruling on the case reversed a decision that would have left Stockton public employees facing pension cuts of up to 60%.
One Stockton bondholder, Franklin Templeton, was reported to be in line to reclaim just 1% of a $36 million investment. It has since appealed the decision.
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