Can anyone tell me why Judge Kapnick has not ruled on the Article 78 case - even though it ended in June 2012? Is she waiting for the Bransted ruling to come out first? Do you think they talk together and coodinate?
Can you expand on your point number 4 above about the Schneiderman statement? Who is he - where did he state that?
Legal challenges Thursday to Stockton, Calif., from two of its biggest creditors over the city's pension obligations has implications for how cash-strapped municipalities deal with retiree benefits during insolvency.
National Public Finance Guarantee Corp., an Armonk, N.Y.-based unit of bond insurer MBIA Inc., filed a petition in U.S. Bankruptcy Court in the Eastern District of California objecting to Stockton's decision not to seek concessions from the California Public Employees' Retirement System before filing for bankruptcy protection in June. National Public Finance said this was unfair given that "similarly situated creditors were asked to take reductions."
Bond insurer Assured Guaranty Corp. also filed a challenge to the city's bankruptcy filing, arguing in part that the city should have sought concessions from Calpers.
"The objections filed, thus far, do not address a myriad of issues that we, as a city, must be sensitive to," said Connie Cochran, a spokeswoman for the city of Stockton, in a statement. She said municipalities have to restructure "through the prism of maintaining basic health and safety for our community."
The two creditors' challenges aim squarely at retiree pension benefits, which have been a sacred cow for many municipalities despite falling revenue and the increasingly heavy burden of pension payouts.
How Stockton resolves the issue of pension benefits "will be very informative," said Richard Larkin, credit analysis director for Herbert J. Sims & Co., a bond underwriter in Iselin, N.J. "Nothing like this [about pensions] has been worked out in bankruptcy court before, and whichever way it is resolved, it could have far-reaching implications."
Mr. Larkin said if Stockton is forced to restructure its pension obligations, other California cities could seek similar changes.
Vallejo, Calif., which filed for Chapter 9 protection in 2008 and emerged last year, restructured all of its debt during the bankruptcy proceedings--with the exception of its pension costs, preferring to continue making full payments to retirees.
Stockton contributes about $10 million annually to an investment fund operated by Calpers, a state-run retirement system for more than 3,000 municipalities, but these payments don't cover what Calpers pays out to Stockton retirees. As a result, Stockton's debt to Calpers totals $147 million.
It is unclear if Calpers would reduce payments to Stockton retirees if the retirement fund agreed to accept less than the $147 million it is owed.
Brad Pacheco, a spokesman for Calpers, said in a statement that the retirement system "remains committed to safeguarding the constitutionally protected pension benefits of the city's employees and retirees."
Stockton, the biggest-ever U.S. city to seek bankruptcy protection, owes $90 million to National Public Finance and about $160 million to Assured Guaranty. The city of 300,000, located 80 miles east of San Francisco, owes creditors a total of more than $700 million.
Chapter 9 of the U.S. Bankruptcy Code provides a financially distressed municipality protection from creditors while it develops a plan for adjusting its debts. The filing bars creditors from demanding a liquidation of assets to repay the municipality's debts.
I still would like to know if any lawyer on this site who has been following the A78 case has a sense or probabilty estimate of - given the extended delay that the judge seems to be taking, if she has been informed that a settlment is in discussion and if she is delaying her decision based on that. What is the probability of that (given the extra delay)?
I like that MBIA and AGO are taking on CALPERS which has been using MFIA tactics against cities. More importantly the actual filing shows that the mayor was conflicted.
The Reuters article has a link to the actual PDF filing by MBIA.
Bond insurer contests Stockton bankruptcy over
By Peter Henderson and Jim Christie
SAN FRANCISCO (Reuters) - A unit of bond insurer MBIA Inc challenged the
California city of Stockton's eligibility for bankruptcy, making an argument -- that
the city can cut pension benefits -- with potentially profound implications for the
The bond insurer in a court filing said the city's failure to ask for concessions
from the California Public Employees' Retirement System pension fund showed
that it had not negotiated with creditors in good faith, and it argued that the city's
plan for recovery was doomed because it did not touch pensions.
The filing sets a roadmap for a battle, in or out of bankruptcy court, in which Wall
Street takes on the largest public U.S. pension fund, Calpers, as troubled cities
and counties watch the outcome closely.
Calpers has used warnings of court battles to dissuade municipalities from
considering pension benefit cuts, but retiree benefits are constricting many cities. San Bernardino, California also faces major
pension obligations and is following Stockton's bankruptcy path.
"It's the equivalent of a declaration of war (on pensions)," said Karol Denniston, a San Francisco lawyer who helped draft California'
bankruptcy process law, said of the filing. "It affects every municipality looking to restructure."
The city of Stockton did not immediately respond to requests for comment. A lawyer for Stockton previously had said that bond
insurers had not even made counterproposals to the city during pre-bankruptcy negotiations as mandated by state law.
Calpers provided information to the city during the talks, spokesman Brad Pacheco said by email. "We remain committed to
safeguarding the constitutionally protected pension benefits of the city's employees and retirees," he added.
A federal judge must approve Stockton's eligibility for Chapter 9 protection before the city can reorganize its debts under court
protection, and a primary criterion is whether the city made a real effort to avoid a bankruptcy filing.
"The city has not presented evidence that it negotiated with its creditors equitably and thus, in good faith," National Public Finance
Guarantee Corp, a unit of MBIA, wrote in the filing. (link.reuters.com/zyv89s)
The company, which insured nearly $94 million of the city's revenue bonds, said Stockton had not negotiated with Calpers at all,
and that its initial proposal to creditors, called 'the Ask,' showed a financial shortfall for 2013-14, even after bond payments were
The insurer said that was because of plans to keep making full pension fund payments. Those pension payments represent a
financial liability, like debt service payments, and should be treated equally, it said.
"The protection of Calpers benefits for the mayor, city council and other city employees is clearly not in good faith," it added...
Ok that is pretty thorough. Thanks. But my question has to do with the extra lenth of time it seems to be taking than what was expected - I think 4 weeks after the trial. It has been much longer than that.
So is there is now a higher probablity assessment that the parties are in such detailed settlement talks that the judge has decided to withhold her decision on the A78 case?
Given that it seems that the judge is taking a long time to decide the Article 78 case (and I believe she is the same judge on the other MBIA-BofA case) - what do you think the probablity is that she has been told that parties are in settlement talks and she may be delaying her decision to determine the outcome of those talks?
Any lawyers on the board give me your probablity assessment.
MBIA's website is posting the transcripts one day late. Here the one from yesterday:
It took me several hours to read through it but I can see why the stock has gone down. The BofA lawyers were brutal. Conversely I am expecting the opposite will happen when the MBIA lawyers present their case next week or so. In fact, Kasowitz, MBIA's law firm, and the Atty General, interrupted BofA's lawyer quite a lot and said at one point "stop calling Mr. Buchmiller a liar". Buchmiller was the civil servent at the NYSID who ran the solvency tests on the Transformation. Indeed most of the testimony yesterday was about what Mr. Buchmiller knew and when did he know it.
So I am not too worried about what happenned this week with the MBIA stock price.
Jaarc - what is your estimate of this impact of this client on CYD's revenue line - and for that matter if this client's sales increased then all of CYD's bus clients probably increased, so I guess the question is what portion of CYD's revenue is bus related?
For Q2, 2010 - I am trying to estimate CYD's expected heavy, medium and light duty shipments. Have you made any estimates.
Also, what is your estimate for revenue for each category and operating margins. Give me your basis.
I can estimate EPS from that. I want to see if you get that specific in your estimates. If you don't do this, do you know any analyst who does?
Thanks so much for your asistance.
Ok. Mr. Xu's report seems to have a discrepency. On page 4, CYD is said to have a 6.4x P/E (I assume using his 2010 estimate). That works out to $105.78m or $2.838 EPS. However, on p. 7 of his report the line for "Net Profit S$m)" shows S$41.4m for 2010. That works out to $30.159m (US$), or only $0.8093 per share. So I assumed that this net profit number (along with the sales and EBIT) was the 27.5% share HLA owns, so I grossed it up by dividing it by 27.5%. That led to the $2.94 EPS ( close to page 4 $2.838 number - although the analyst's numbers should be equivalent). It appears thought that the sales number on page 7 is for 100% of CYD and not the 27.5% share as the Net Profit number seems to be.
Bottom line on page 4 his EPS estimate is at least $2.84 per share. At 16x that means $45.44 per share. Adding in $8.88 in net cash yields a SOTP of $54.32 per share
Here are the implied CYD numbers from Patrick Xu's (DBS Vickers) report:
EBIT $ 654.7m
Net Inc $ 109.5m
EPS $ 2.94
EBIT $ 718.7m
Net Inc $ 120.6m
EPS $ 3.24
Using his 16x muliple for CYD's valuation:
2010 $47.02 per share
But he forgot to add in the net cash/securities which we estimate is $8.88 per share:
Note that Xu's implied 2010 EPS of $2.94 is much higher than the recent Barron's estimate of $2.58.
Also note that given CYD's huge growth prospects it will likely pick up a much higher multiple than 16x, as Xu estimates.