Stockton bankruptcy saga drawing to an end

January 20, 2015

 

Downtown_Stockton_California

Stockton’s two-year long bankruptcy saga appears to be nearing an end as a stay of the city’s reorganization plan, sought by Franklin High Yield Tax-Free Income Fund, was denied on Tuesday.

The Stockton bankruptcy case appears to be near its end. Chief Judge Christopher M. Klein of the Unites States Bankruptcy Court for the Eastern District of California denied a stay in Stockton’s long-running saga, Tuesday. The decision clears the way for the city to exit the bankruptcy process that it began two years ago.

Franklin High Yield Tax-Free Income Fund was the lone holdout creditor fighting the city’s reorganization plan. The company appealed the judge’s decision to approve the city’s plan in November and sought a stay as the appeal winds its way through the courts.

Once the judge signs the order, an automatic stay will be in place for 14 days, after which the city’s plan can go into effect.

This is great news,” said City Manager Kurt Wilson in a press release. “As the judge indicated in court today, it removes a lot of uncertainty for all of us – employees, retirees, creditors, businesses and investors – and allows Stockton to move forward without the stigma of bankruptcy.”

Franklin’s appeal will be reviewed by three bankruptcy judges who serve on the United States Bankruptcy Appellate Panel of the Ninth Circuit.

Judge Klein said he believed that the chances of Franklin’s appeal being successful were low and that allowing the plan to continue was in the public’s best interest.

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