Bloomberg says RI is ‘Setting Standard For Bondholders’ Love’

August 30th, 2012 at 9:33 am by under Nesi's Notes, On the Main Site

First it was Bond Buyer, and now Bloomberg News is using Central Falls’ expected exit from bankruptcy next week to take stock of Rhode Island’s solicitous attitude toward Wall Street and its bondholders. Michael McDonald and Steven Church report for Bloomberg:

Central Falls, the first city in Rhode Island’s 222-year history to go bankrupt, is preparing to exit court protection after 13 months by keeping bondholders whole while raising taxes and cutting workers and pensions.

The financial and political support Central Falls got from state officials makes the case unique among municipal bankruptcies in the past year from Alabama to California. …

The Central Falls approach “is a good sign for bondholders of Rhode Island bonds compared to, say, California,” said Alan Schankel, head of fixed-income research at Janney Montgomery Scott LLC, an investment bank in Philadelphia. …

“You take the bonds being held hostage out of the equation,” said James Spiotto, a bankruptcy lawyer in Chicago with Chapman & Cutler LLP.

To understand why Central Falls’ bankruptcy will likely go down as one of the major policy achievements of the Chafee administration, it’s instructive to read this May 2011 post explaining just how difficult the process was expected to be. For better or worse, depending on your perspective, Central Falls will now be held up as evidence that municipalities can use Chapter 9 effectively to get out from under their financial burdens.

Rhode Island’s high unemployment rate and long list of financial problems make it easy to miss the fact that significant progress has been made by the class of officials elected in 2010 – Chafee (and Rosemary Booth Gallogly) in Central Falls and other municipalities, Raimondo and Chafee with the state pension system, Taveras with the mess in Providence. The most important and toughest task remains, though – fixing the state’s economy.

• Related: Could RI’s pay-bondholders-first law be unconstitutional? (Aug. 12)

(photo: Ted Nesi/WPRI)

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5 Responses to “Bloomberg says RI is ‘Setting Standard For Bondholders’ Love’”

  1. bobby gee says:

    Next up: 38 Studios!! Thanks Don!

  2. oreo says:

    “it easy to miss the fact that significant progress has been made by the class of officials elected in 2010 – Chafee (and Rosemary Booth Gallogly) in Central Falls and other municipalities, Raimondo and Chafee with the state pension system, Taveras with the mess in Providence”.
    We shall see, Raimondo and Chafee maybe GOATS if the courts side with the unions. If not every union member should opt out of the retirement system asap. If the courts say the unions do not have a contract then the state cannot force union members to be a part of the retirement system. Then who pays for the already retired?? Yes the TAX payers. State cannot win.

  3. Steve D says:

    According to a federal BR lawyer, this law is illegal. States cannot circumvent federal BR laws like RI did. The end of this story is not over yet!

  4. David Stowe says:

    Great article concerning mass income. I really enjoyed reading it and will be back to view more of your posts!

  5. eatingdogfood says:

    You really didn’t think that Gov. Moonbeam and his Double Dealing
    Democratic Cohorts would Stab their Union Bosses in the Back, Did Ya ???
    Only one way out of this !!! Declare Martial Law and Nationalize the
    National Guard and Arrest All the Democrats and Union Bosses on RICO
    Conspiracy Charges !!!