Tuesday, February 02, 2010
I have not been paying attention... but there is activity in the chapter 9 bankruptcy proceedings out in Vallejo California. I can't quite tell what it all means, but I once explained why Vallejo matters to us here and here and here. The thing that caught my attention is this little broadside from the bond rating agency Fitch just last week about what the Vallejo precedent could mean across the nation. That right there tells me something is up. Fitch seems to think as I have suggested that Vallejo could be a clear precedent for some other municipal bankruptcies down the road. It all sounds preliminary, but Fitch describes part of it with this line: "At least some classes of bondholders would have to share in losses along with other creditors under the ruling". That right there would mean a lot, but I would love a bankruptcy lawyer's opinion on the other line Fitch throws out there that "Bondholders usually are protected from sharing in losses.". Really? My admittedly non-lawyerly reading of the law on that specific topic would not lead me to any such statement.