San Bernardino has defaulted on $10 million in bond payments. Bond Holders Stiffed While Payments to Pension Funds Favored.

CNBC reports:

The southern California city of San Bernardino has defaulted on nearly $10 million in payments on its privately placed pension bond debt since it declared bankruptcy in 2012, according to documents seen by Reuters.

In addition, the city has not negotiated with its bondholders since September, according to a person familiar with the stalled negotiations.


The missed payments illustrate the trend among cities in bankruptcy to favor payments to pension funds over bondholder obligations, which has increased the hostility between creditors and municipalities.

San Bernardino declared last year that it intends under its bankruptcy exit plan to fully pay Calpers, its biggest creditor and America's largest public pension fund with assets of $300 billion.

The city continues to pay its monthly dues to Calpers in full, but has paid nothing to its bondholders for nearly three years, according to the interest payment schedule on roughly $50 million of pension obligation bonds issued by San Bernardino in 2005.

It's not like we didn't warn you back in 2008. Do you really want to lend money to a place that has public union pension obligations ? Are your local politicians the executive committee of some public sector union?