Stockton, Calif., files bankruptcy petition; largest in U.S. history

STOCKTON, Calif., Fri Jun 29, 2012 – Stockton, Calif., became the largest city to file for bankruptcy in U.S. history on Thursday, after years of fiscal mismanagement and a housing market crash left it unable to pay its workers, pensioners and bondholders.

The filing, announced by the city of 300,000 people, followed three months of confidential talks between the city and its creditors aimed at averting bankruptcy.

“We are now a Chapter 9 debtor,” said Marc Levinson, a lawyer representing Stockton, noting he filed the city’s voluntary petition in U.S. Bankruptcy Court for the Eastern District of California in Sacramento, California as Case 12-32118.

Levinson said pleadings in support of Stockton’s eligibility for Chapter 9 bankruptcy will be filed on Friday.

“We are extremely disappointed that we have been unable to avoid bankruptcy,” Mayor Ann Johnston said in a statement. “This is what we must do to get our fiscal house in order and protect the safety and welfare of our citizens.”

The negotiations ended on Monday with Stockton failing to win enough concessions to help close its shortfall for the fiscal year starting on July 1.

“Our general fund resources are depleted, and we cannot allow the city to spiral into uncontrolled default,” City Manager Bob Deis said. “Bankruptcy stops a barrage of lawsuits and allows the city breathing room while working toward a plan of adjustment and moving Stockton forward.”

The filing of Chapter 9 bankruptcy, a rare event for the U.S. municipal issuers, was left as the only option to close a deficit of $26 million for the budget of the new fiscal year.

The budget suspends $10.2 million in debt payments and cuts employee compensation and retiree benefits by $11.2 million. About $7 million in savings would come from cutting retiree medical benefits for one year. The retiree medical benefits will be eventually eliminated.

Stockton becomes the nation’s most populous to file for Chapter 9 bankruptcy. But Jefferson County, Ala., remains the biggest in terms of debt outstanding, as it had a debt load exceeding $4 billion when it filed in 2011. Stockton has about $700 million in bond debt.

Core producer price rise largest in six months

WASHINGTON – Producer prices outside food and energy recorded their largest increase in six months in January, but are unlikely to ignite inflation pressures given the slack in the labor market.

The Labor Department said on Thursday its seasonally adjusted core producer price index rose 0.4 percent last month, the largest gain since July, after increasing 0.3 percent in December.

Economists polled by Reuters had expected core PPI to rise only 0.2 percent. In the 12 months to January, core producer prices rose 3.0 after increasing 2.7 percent in December.

But overall prices received by farms, factories and refineries edged up 0.1 percent after dipping 0.1 percent in December.

The rise, which was smaller economists’ expectations for a 0.4 percent gain, reflected declines in food and energy prices.

In the 12 months to January, producer prices increased 4.1 percent, moderating from 4.8 percent December. That was the smallest increase in a year.

The Federal Reserve last month viewed inflation as largely contained and said it expected to hold interest rates near zero at least through late 2014.

But a surprisingly strong run of economic data – from job growth to manufacturing – is raising questions about whether the U.S. central bank can hold off on tightening monetary policy that long.

Wholesale prices outside of food and energy were pushed up by drugs costs, which accounted for about 40 percent of the increase. Higher prices for light motor trucks and household appliances also contributed.

Passenger car prices fell 0.8 percent after rising 0.5 percent in December.

Boeing signs record $22.4 billion commercial order with Lion Air

CHICAGO – Boeing Co said on Tuesday it signed its largest ever commercial airplane order with Indonesia’s Lion Air in a deal worth $22.4 billion.

Boeing said Lion Air, Indonesia’s largest carrier by passenger volume, has ordered 230 airplanes, including 201 737 MAXs and 29 next-generation 737-900 ERs.

Lion Air will also acquire purchase rights for an additional 150 airplanes, Boeing said.

The announcement was made in a statement at the Singapore airshow.

In November, Lion Air announced the original massive order during U.S. President Barack Obama’s Asia-Pacific tour. Europe’s Airbus had accused the United States of applying political pressure to secure the deal.