How Many (Default) Balls Can the Municipal Bond Market Juggle Until One Falls?

Wednesday, August 1, 2012


Add the cities of Stockton CA and Scranton PA to the list of municipal cities filing for bankruptcy or facing financial collapse.  Along with Birmingham AL, Harrisburg PA, Vallajo CA, Mammoth Lakes CA, San Bernardino CA and others, the list continues to grow with little resolution in sight for most.  The driving force behind the financial distress of each of these cities varies widely, from sewer district issues in Birmingham to solid waste disposal issues in Harrisburg. However, the city most bondholders are keeping a watchful eye upon is Stockton CA.  Stockton is trying to become the first city in nearly 100 years to force bondholders to accept less than full repayment of their outstanding bonds in their bankruptcy filings. 

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