Stockton, California, has emerged from Chapter 9, but its path was neither quick nor easy. The city’s tax base had dried up during the housing crisis, and by the time it filed for bankruptcy in 2012, it faced an immediate budget shortfall of $26 million and needed to restructure hundreds of millions of dollars in long-term obligations.
By 2013, Marc Levinson, a partner in the restructuring group at Orrick, Herrington & Sutcliffe, had reached new agreements with the city’s nine labor unions, eliminating $545 million in employee health benefit costs, as well as with monoline insurers who backed about $275 million in debt. The next year was spent in litigation with holdout creditor Franklin Templeton Investments Inc., which ended up receiving about 17.5 percent on about $36 million in city bonds that it held. (Franklin Templeton, represented by Jones Day, has said it will appeal.)
