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OpporMUNIties in Chapter 9:
What Distressed Investors
Should Know?
The Bond Buyer California Public Finance Conference
October 18, 2012
Lewis Feldman
Partner, Goodwin Procter LLP
Emanuel Grillo
Partner, Goodwin Procter LLP
Chief Judge Christopher Klein
U.S. Bankruptcy Court for the Eastern District of California
William Nolan
Senior Managing Director – Corporate Finance, FTI Consulting

Municipal Bankruptcies: Chapter 9 Filings
Cities, towns and counties are shown in red. Utility authorities and other municipalities are displayed in black.
WASHINGTON
OREGON
$
$
MONTANA
NORTH
DAKOTA
SOUTH
DAKOTA
MINNESOTA
WISCONSIN
NEW HAMPSHIRE
VERMONT
MAINE
IDAHO
WYOMING
NEBRASKA
$
IOWA
MICHIGAN
NEW YORK
$ $ $
$
$
$
NEVADA
UTAH
COLORADO
KANSAS
$
ILLINOIS INDIANA OHIO
WEST
VIRGINIA
PENNSYLVANIA
NEW JERSEY
DELAWARE
MASSACHUSETTS
RHODE ISLAND
CONNECTICUT
CALIFORNIA
$
ARIZONA
NEW MEXICO
OKLAHOMA
IOWA
$ $ $
ARKANSAS
KENTUCKY
TENNESSEE
$
$
GEORGIA
$ $
SOUTH
CAROLINA
VIRGINIA
NORTH
CAROLINA
MARYLAND
DISTRICT OF
COLUMBIA
TEXAS
$
MISSISSIPPI
ALABAMA
$
LOUISIANA
FLORIDA
Source: Governing. This map shows all municipalities filing for Chapter 9 bankruptcy protection since 2010, along with local governments voting to approve a bankruptcy filing. Information current as of September 11, 2012.

MUNICIPAL BANKRUPTCIES:
CHAPTER 9 FILINGS
Cities, towns and counties are shown in red. Utility authorities and other municipalities are displayed
in black.
Source: Governing. This map shows all municipalities filing for Chapter 9 bankruptcy protection since 2010, along with local governments voting to approve a bankruptcy filing.
Information current as of September 11, 2012.
Legend:
Alabama
Jefferson County
Status: Filed for bankruptcy
Date: 11/9/2011
Debt or Deficit Amount: More than $4 billion
The county has laid off about 500 workers since declaring for
bankruptcy in November 2011. A federal judge ruled in March
that the bankruptcy was allowed under state law.
Arkansas
Centerton Municpal Property Owners’ Improvement
District No. 3 – Versailles
Fayetteville, AR
Status: Filed for bankruptcy
Date: 10/12/2011
Sylamore Valley Water Association Public Facilities Board
of Izard County
Mountain View, AR
Status: Filed for bankruptcy
Date: 4/19/2012
California
Mendocino Cost Recreation and Park District
Fort Bragg, CA
Status: Filed for Bankrupcy
Date: 12/29/2011
Stockton
Status: Filed for bankruptcy
Date: 6/28/2012
Debt or Deficit Amount: $26 million
Stockton, Calif., filed for bankruptcy after being unable to reach
an agreement with its creditors. The city must pay steep
pension and payroll costs while taking in less money from
property taxes.
Mammoth Lakes
Status: Filed for bankruptcy
Date: 7/3/2012
Debt or Deficit Amount: $43 million
Mammoth Lakes, a small California resort town, voted to file for
bankruptcy July 3. The city has been unable to pay a $43 million
legal judgment resulting from a 1997 property development
dispute.

MUNICIPAL BANKRUPTCIES: CHAPTER 9 FILINGS
California (cont.)
San Bernardino
Status: Filed for bankruptcy
Date: 8/1/2012
Debt or Deficit Amount: $46 million
San Bernardino City Council voted to file for bankruptcy
protection after learning the city had only $150,000 left in its
bank accounts.
Georgia
Hospital Authority of Charlton County
Folkston, GA
Status: Filed for bankruptcy
Date: 4/30/2012
Idaho
Boise County
Status: Bankruptcy filing rejected
Date: 9/8/2011
Debt or Deficit Amount: $5.4 million
A federal judgment ordered the rural county to pay $5.4 million
in damages and attorney fees to developer Oaas-Laney for
allegedly violating the federal Fair Housing Act. The county
later filed for bankruptcy, but failed to prove it was insolvent.
Lost Rivers District Hospital
Arco, ID
Status: Filed for bankruptcy
Date: 3/10/2010
Missouri
Lake Lotawana Community Improvement District
Lee's Summit, MO
Status: Filed for bankruptcy
Date: 8/27/2010
Nebraska
Sanitary and Improvement District #512 of Douglas
County
Omaha, NE
Status: Filed for bankruptcy
Date: 11/1/2011
New York
Suffolk Regional Off-Track Betting Corporation
Hauppauge, NY
Status: Filed for bankruptcy after initial filing in 2011 was
rejected
Date: 5/11/2012
The New York State Legislature changed the state's laws to
allow Suffolk OTB to file for bankruptcy after the agency's
previous filing was rejected. Suffolk OTB, which manges six
branches, reported a $5.1 million net operating loss for 2011.
Oklahoma
Rural Water District No. 1, Cherokee County
Ft. Gibson, OK
Status: Filed for bankruptcy
Date: 1/23/2012
Pennsylvania
Harrisburg
Status: Bankruptcy filing rejected, defaulted on payments
Date: 3/10/2012
Debt or Deficit Amount: More than $300 million
Harrisburg skipped about $5 million in debt payments in
March. Much of the city's debt is related to a failed waste-toenergy
plant.
Rhode Island
Central Falls
Status: Filed for bankruptcy
Date: 8/1/2011
Debt or Deficit Amount: $21 million of outstanding debt, plus
unfunded pension liabilities
State-appointed receiver Robert Flanders filed for bankruptcy
protection and has since cut pensions for retirees.
South Carolina
Barnwell County Hospital
Barnwell, SC
Status: Filed for bankruptcy
Date: 10/5/2011
Bamberg County Memorial Hospital
Bamberg, SC
Status: Filed for bankruptcy
Date: 6/20/2011
Goodwin Procter, LLP

MUNICIPAL MARKET: ISSUER CONCENTRATION
FIVE STATES DOMINATE THE $3.7 TRILLION MUNICIPAL BOND MARKET
Of the $3.71 trillion in total outstanding debt sold, the top 10 states and their municipalities account for $2.15 trillion, or 58%. The top five states alone –
California, New York, Texas, Illinois and Florida, account for almost 46 % of the entire market.
SOURCE: Bloomberg Visual Guide to Municipal Bonds, “Bloomberg Brief: Municipal Market” (June 21, 2011)
Amount Outstanding
Investors
State
($ Billions)
California 585.7
New York 373.6
Texas 320.0
Illinois 190.8
Florida 182.5
Pennsylvania 148.4
New Jersey 135.5
Ohio 113.4
Massachusetts 107.1
Puerto Rico 105.1
Michigan 88.7
Washington 83.9
Georgia 79.1
Colorado 69.9
Virginia 66.5
Arizona 61.7
Indiana 61.1
North Carolina 60.3
Missouri 58.9
Minnesota 55.8
Tennessee 50.5
Maryland 50.3
Connecticut 47.8
Wisconsin 47.3
South Carolina 40.9
Kentucky 38.5
Louisiana 38.3
Amount Outstanding
Investors
State
($ Billions)
Oregon 37.4
Alabama 36.5
Nevada 33.4
DC 30.5
Mississippi 26.1
Utah 24.8
Kansas 24.2
Iowa 21.2
Oklahoma 20.5
Nebraska 18.4
New Mexico 17.9
Hawaii 16.5
Rhode Island 15.0
Montana 14.2
Arkansas 13.0
New Hampshire 12.2
Alaska 11.8
West Virginia 11.8
Idaho 11.5
Delaware 9.3
Maine 8.8
South Dakota 7.8
Vermont 6.1
North Dakota 4.1
Wyoming 4.0
Virgin Islands 2.5
Guam 2.0
Total (including other territories) 3,712.4

MUNICIPAL BONDS OUTSTANDING IN AUGUST 2011
WHERE IS THE MONEY COMING FROM?
Municipal Bonds Outstanding in August 2011: Where Is The Money Coming From?
Primarily Private in Blue and Primarily Public in Green
Amount
Type of Revenue
Outstanding
($ Billions)
% of Outstanding
Market
% of Total
Monetary Defaults
State General Fund or Ad Valorem property tax (GO) 727 20
Ad Valorem property tax (school districts) 426 12
Hospital revenues 270 7 3
Water and sewer revenue 260 7
Higher education revenues 215 6
Miscellaneous taxes 204 6
Housing revenues 187 5 18
Nuclear, public power, solid waste and municipal utility
185 5
system revenues
Economic or corporate-backed industrial development 134 4 9
Government-backed leases, public facility leases 128 3
Tobacco settlement 106 3
Toll-backed roads/bridges/tunnels 101 3
Airport revenues 86 2
Land-secured 62 2 33
Public transport revenues 54 1
Long-term care revenues 46 1 15
Cultural and human service provider charities 22 1 2
Other 455 12
TOTALS 3,668 100 80
SOURCE: Bloomberg Visual Guide to Municipal Bonds, “Bloomberg Brief: Municipal Market” (June 21, 2011)

NUMBER OF BORROWERS WHO DEFAULTED ON
MUNI BONDS AND THEIR INDUSTRY DISPERSION
2007 – 2010
Number of Borrowers Who Defaulted on Muni Bonds and Their Industry Dispersion (2007 – 2010)
Primarily Private in Blue and Primarily Public in Green
All Monetary and Technical Defaults: 737 Monetary Defaults: 392
% of Total Issuers / Borrowers with Monetary
Defaults
Issuer / Borrower Category
Land-secured 33
Housing 18
Long-term care 15
Economic or corporate-backed industrial
9
development
Hospitals 3
Government-backed leases, public facility leases 3
Charter schools 3
Cultural and human service provider charities 2
Universities 2
Local public utilities 2
Private schools 1
Public Education 1
Native American 1
GO 1
Public transportation 1
Toll roads/bridges/tunnels 1
Parking facilities 1
Other 3
TOTAL 100
SOURCE: Bloomberg Visual Guide to Municipal Bonds, “Bloomberg Brief: Municipal Market” (June 21, 2011)

Goodwin Procter
MUNICIPAL BANKRUPTCY
AND RESTRUCTURING
Municipalities and state governments are in crisis. The prolonged
economic downturn, followed by a weak economic recovery and
exacerbated by the historic unwillingness of local governments to address
legacy liabilities, has led many cities to seriously consider the once
unthinkable prospect of municipal bankruptcy.
The potential impact of municipal bankruptcies reaches far beyond
the municipality itself. Unions, pension funds, bondholders and bond
insurers, as well as vendors and other parties need to understand
municipal bankruptcies and restructurings and how each could affect
their interests.
With this comes a host of legal questions and challenges. Goodwin
Procter’s Public Finance and Financial Restructuring Groups have formed
an interdisciplinary Municipal Bankruptcy and Restructuring Practice to
advise on issues of public finance, restructurings and Chapter 9 of the
U.S. Bankruptcy Code. Our combined experience makes us uniquely
positioned to effectively advise any stakeholder in a municipal bankruptcy.
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and investors.
We have experience in public financings for all project classes including:
• Public capital improvements
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From troubled entities and international insolvencies to failed start-ups, our
financial restructuring attorneys work with debtors, creditors and committees
in high profile and middle-market restructurings. We implement transactional
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We represent every type of major stakeholder in out-of-court restructurings
and formal bankruptcy proceedings. We negotiate to preserve, maximize and
enforce creditors’ rights and remedies; debtors’ protection against creditors;
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For more information on our Municipal
Bankruptcies Practice, please contact:
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213.426.2688
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212.813.8880
egrillo@goodwinprocter.com
Deborah Schrier-Rape, Partner
858.202.2751
DSR@goodwinprocter.com
Gina Lynn Martin, Partner
617.570.1330
gmartin@goodwinprocter.com
Bruce J. Graham, Partner
213.426.2658
bgraham@goodwinprocter.com
Douglas A. Praw, Partner
213.426.2664
dpraw@goodwinprocter.com
Meagan E. Costello, Associate
212.813.8854
mcostello@goodwinprocter.com
Our deep restructuring experience, coupled with the expertise of our public
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related to Chapter 9 of the U.S. Bankruptcy Code.
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Illustrating our commitment to the issues affecting distressed municipalities, MuniBK
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For content, analysis and commentary on the intersecting issues of public finance, restructurings and Chapter 9 of the
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DIP LOANS: A NEW POCKETBOOK FOR DISTRESSED MUNICIPALITIES?
By: Manny Grillo
In most large bankruptcy reorganizations, the entity filing for protection (known in bankruptcy lingo as the debtor in
possession or “DIP”) requires new funding to finance the costs of the Chapter 11 case. Known as “DIP Loans,” this type of
financing is almost always secured by senior liens on the debtor’s assets. Special opportunity investment funds dominate the
landscape and provide much of the capital for these loans. In recent weeks, municipalities, such as Scranton, Pennsylvania,
facing significant short-term liquidity crises, have started to reach out to hedge funds as possible lending sources. This
raises the question as to whether municipalities will seek DIP Loans in Chapter 9 municipal bankruptcy cases, and, if so, on
what basis?
While not all of the provisions of the Bankruptcy Code apply in Chapter 9 cases, Section 901 of the Bankruptcy Code, makes
Sections 364(c) and (d) of the Bankruptcy Code applicable to Chapter 9 municipality bankruptcy cases. Under these
provisions, a debtor may borrow money on a senior secured (and even a priming) basis. Therefore, a court could grant an
order authorizing a municipal debtor to borrow money and grant senior security interests in its assets.
Municipalities typically borrow funds on a variety of bases and Scranton recently issued a tax anticipation note (TAN), a
practice it has used in the past, to cover payroll as part of its recovery plan. Unlike an “all assets” superpriority lien that is
common with DIP Loans in Chapter 11 reorganization proceedings, it remains to be seen what will happen if Scranton’s
economic recovery plan and the anticipated tax revenue to support the TANs falls short of expectations. Will Scranton or
another municipality look to the investment funds experienced in the distressed lending arena to provide DIP Loan financing?
Can the investment funds get comfortable with any pledge of collateral for the DIP Loan that a municipality may make?
As part of these transactions, DIP Lenders typically ask for a variety of other protections such as budgets and performance
covenants based upon these budgets. While courts can order debtors to comply with such provisions in most Chapter 11
cases in which DIP Loans are authorized, potential DIP Lenders in Chapter 9 cases should realize that the court’s power
over a municipal debtor may be limited. Under Section 904, absent the municipal debtor’s consent, the court may not
“interfere” with any of the “property or revenues of the debtor” or its “use or enjoyment of any income producing property.”
While a debtor might consent to the terms of the DIP Loan when made, will the municipality consent to the type of actions
lenders are normally permitted to take upon default? When underwriting a DIP Loan, DIP lenders carefully scrutinize their
ability to exercise remedies against their collateral. Will a bankruptcy court allow a DIP Lender to do that in a municipal
case? We may find out sooner rather than later.
FOR MORE ANALYSIS AND COMMENTARY VISIT MUNIBK at http://blog.munibk.com/

ARE PENSION WARS COMING IN CALIFORNIA MUNICIPAL BANKRUPTCIES?
By: Manny Grillo and Lew Feldman
On September 12, 2012, CalPERS’ general counsel released a public statement setting forth CalPERS’ legal position on the
limitations of the power of the bankruptcy courts to interfere with the relationship between the state of California and its
municipalities regarding the payment of retirement and other benefits to state employees.
Pensions and other benefits remain at the forefront of the municipal financial crisis in California, and it appears that CalPERS
may be setting the stage for forthcoming legal battles in the Stockton case, and perhaps others. CalPERS has previously
proudly boasted that Vallejo did not take CalPERS on with respect to pension benefits, but only healthcare retiree benefits.
For months, commentators have predicted a looming constitutional battle over pension benefits. The acuteness of the
pension crisis was made plain in a Stanford Institute for Economic Policy Research Report, published earlier this year, which
concluded that aggregate pension costs have expanded at a rate of 11.4% per year and pension expenditures represent
10.1% of total municipal spending.
Whether Stockton, San Bernardino or another municipality will undertake a war of attrition against CalPERS over pension
benefits remains to be seen.
FOR MORE ANALYSIS AND COMMENTARY VISIT MUNIBK at http://blog.munibk.com/

BUILDING CONSENSUS IN A MUNICIPAL BANKRUPTCY
By: Meagan Costello
Throughout the United States, many municipalities are facing severe financial distress and being forced to examine Chapter
9 (http://www.law.cornell.edu/uscode/text/11/chapter-9) -- the section of the Bankruptcy Code governing municipality
eligibility -- as a means of eliminating debt and restructuring their obligations.
While the causes of financial distress vary among municipalities, municipal creditors are often composed of the same
groups, a mix of “ordinary people” such as pensioners and civil servants, combined with sophisticated financial institutions
and bondholders.
Add these diverse constituencies to the current political environment, mix in the fact that municipalities must often raise taxes
to raise revenue, and the result is often a prolonged political battle that provides little progress towards a real solution.
It is often overlooked that the Bankruptcy Code itself attempts to alleviate the potential for stalemate and assuage fears that if
bankruptcy is “too easy” there will be a rash of unnecessary municipal filings. The Bankruptcy Code does this by generally
requiring municipalities to work with their creditors as a prerequisite to filing for protection under Chapter 9.
Chapter 9 (http://www.law.cornell.edu/uscode/text/11/109) requires the municipality to demonstrate that prior to filing for
bankruptcy, it:
Obtained the agreement of certain creditors to the restructuring plan; or
Negotiated with creditors but was unable to reach a resolution; or
Show that although it did not negotiate with its creditors, engaging in the process would have been impractical.
Additionally, some states, such as California (http://www.leginfo.ca.gov/pub/11-12/bill/asm/ab_0501-
0550/ab_506_bill_20111009_chaptered.html) , require a municipality to attend mediation with its creditors before filing for
Chapter 9 protection (unless a state of emergency exists.) Failure to adhere to these requirements can result in dismissal of
the bankruptcy petition.
This pre-filing negotiation process is intended to expedite the Chapter 9 process and maximize its efficiency. Creditors should
use this process wisely and recognize that, no matter what the cause of a municipality’s financial woes, all parties will need to
compromise their claims for a prompt and efficient resolution.
Fundamentally, all restructurings are simply a matter of math: the assets of the debtor must be valued, measured against the
claims asserted, and then distributed accordingly. The more quickly major constituencies (including the taxpayers) accept
the inevitable, the faster municipalities can move forward with reorganization, emerge from Chapter 9 protection and
establish a new sense of normalcy.
FOR MORE ANALYSIS AND COMMENTARY VISIT MUNIBK at http://blog.munibk.com/

CALIFORNIA PREREQUISITES TO MUNICIPAL BANKRUPTCY FILINGS: WORKING OR NOT?
By: Douglas Praw
Historically, a municipality could file for protection under Chapter 9 of the United States Bankruptcy Code without seeking
prior state approval or satisfying any pre-conditions. As a response to the City of Vallejo’s 2008 bankruptcy filing, the
California state legislature passed AB 506, which became effective on January 9, 2012. AB 506 permits a financially
troubled city or agency to file for bankruptcy protection, but it must satisfy a prerequisite before doing so.
The entity must either: (1) engage in a neutral evaluation process with its creditors with the help of a mediator for a minimum
of 60 days, or (2) declare a fiscal emergency.
By promoting the use of a neutral evaluator, the legislation encourages the municipality to work with its creditors to craft a
settlement or readjustment plan that has the requisite support to be approved.
The fiscal emergency alternative requires a resolution of the majority of the governing body of the agency or municipality. It
must be accompanied by findings that the financial status is jeopardizing the health, safety or well-being of the residents or
constituents of the entity. In addition, the resolution must state that the body is unable to pay its obligations within the next
60 days.
In both cases, the goal is to promote a more efficient resolution that will accelerate completion of the bankruptcy process if it
remains necessary. But, is AB 506 working?
The City of Stockton chose to engage a neutral evaluator. After 60 days of working with former United States Bankruptcy
Judge Ralph R. Mabey of Salt Lake City, the City of Stockton elected to extend the negotiation period for an additional 30
days. In the end, the City filed for bankruptcy protection.
The City of San Bernardino did not engage a neutral evaluator, instead opting to declare a fiscal emergency and then
immediately filing for bankruptcy protection.
Both cities’ bankruptcy plans are being challenged for a host of different reasons, implying that AB 506 may merely be a
speed bump on the road to bankruptcy – slowing the process but not helping municipalities avoid bankruptcy or making the
process more efficient.
FOR MORE ANALYSIS AND COMMENTARY VISIT MUNIBK at http://blog.munibk.com/

CHARACTERISTICS OF “NEUTRAL EVALUATORS”: THE CALIFORNIA EXPERIENCE TO DATE
By: Deborah Schrier-Rape
In October 2011, California passed AB 506 which established prerequisites before a municipality is eligible to file for protection
under Chapter 9 of the United States Bankruptcy Code. Under AB 506, any entity seeking to file under Chapter 9 must first
engage a mediator to negotiate with creditors for a 60-day neutral evaluation process, unless it declares that a “fiscal emergency”
prohibits engaging in such a process.
Mammoth Lakes and Stockton are the first instances in which this mediator process has been put into practice. Both cases offer
insight into the type of individuals likely to be chosen as neutral evaluators, how these neutral evaluators function and the efficacy
of the AB 506 process.
Mammoth Lakes
Once it became clear that Mammoth Lakes would be unable to satisfy its outstanding debts, it sent a letter to interested parties
requesting their participation in the neutral evaluation process. About half of the interested parties agreed to participate, although
Mammoth Lakes Land Acquisition LLC (MLLA), Mammoth Lakes’ single largest creditor, chose to abstain. District Court Judge
David Coar was selected as the neutral evaluator.
Judge Coar has had a multi-faceted legal career as an associate professor and associate dean of DePaul University College of
Law; a U.S. Trustee; a Bankruptcy Judge; and a District Court Judge for the District Court for the Northern District of Illinois.
The 60-day neutral evaluation period concluded without resolution, but the town was able to establish a framework for a potential
plan of reorganization.
When Mammoth Lakes entered Chapter 9, the presiding bankruptcy court judge appointed Judge Elizabeth Perris, Chief Judge of
the Bankruptcy Court for the District of Oregon, to serve as judicial mediator to continue the pre-petition mediation process in
parallel to the bankruptcy proceeding. Within a month of filing, the mediation process resulted in a settlement between Mammoth
Lakes and MLLA. Because MLLA chose not to participate in the AB 506 process, it is unclear whether the pre-bankruptcy
negotiations played any critical role in the settlement.
Stockton
Nearly all of the invited interested parties agreed to participate in Stockton’s neutral evaluation process and selected Judge Ralph
Mabey to serve as mediator. Like Judge Coar, Judge Mabey has had an accomplished and varied legal career. In addition to
serving as a United States Bankruptcy Judge, Judge Mabey is a professor at the Reuben Clark Law School, Brigham Young
University and has served as Chair of the American College of Bankruptcy.
Like Mammoth Lakes, Stockton’s neutral evaluation process ended with a Chapter 9 filing, but this does not mean that the process
was a failure. It may have set the groundwork for a more efficient bankruptcy process, providing an opportunity for the parties to
clarify their positions and discover potential common ground. Whether the pre-bankruptcy negotiations were effective in shortening
the Chapter 9 process remains to be seen.
Judge Mabey has also appointed Judge Perris to be the judicial mediator in the Stockton bankruptcy case. Like Mammoth Lakes,
the mediation will run in parallel to the Chapter 9 bankruptcy proceeding.
FOR MORE ANALYSIS AND COMMENTARY VISIT MUNIBK at http://blog.munibk.com/

WILL MUNICIPAL BANKRUPTCIES UNSETTLE THE BOND MARKET?
By: Bruce J. Graham
The surge in municipal bankruptcies across the country, including three in California since January, has been unsettling for
bond market participants. Moody’s Investors Service, a national rating agency, recently announced plans to conduct in-depth
reviews of numerous California cities, especially those cities that have declared fiscal crises. The Federal Reserve Bank of
New York suggested this month that “municipal defaults are far more common than frequently cited statistics suggest.”
Despite the anxious commentary and intensified scrutiny, it remains unclear whether the increase in municipal bankruptcies
has had any material detrimental effect on the issuance or purchase of municipal obligations to date, or if it will in the future.
If municipal bankruptcy filings continue to increase, however, the market for municipal debt, particularly obligations secured
by an issuer’s general fund, may suffer.
When a city files for bankruptcy under Chapter 9 of the United States Bankruptcy Code
http://www.law.cornell.edu/uscode/text/11/chapter-9, it is permitted to restructure and discount its debt, including obligations
secured by the city’s general fund. Consequently, in a bankruptcy scenario, investors owning these obligations risk being
repaid less than the full value of their investment. In addition, should rating agencies like Moody’s continue to downgrade
municipal credit ratings, the cost of borrowing will increase, adding more strain to the bond market.
Despite the tumultuous economic environment, bond yields remain historically low and municipal bonds remain an attractive
vehicle for investors seeking tax-exempt returns. If the country continues its economic recovery and municipalities continue
to tighten their fiscal belts, the recent flurry of municipal bankruptcies may ultimately prove inconsequential to the overall
municipal market.
FOR MORE ANALYSIS AND COMMENTARY VISIT MUNIBK at http://blog.munibk.com/

CHAPTER 9 VS. CHAPTER 11: A SUMMARY OF KEY DIFFERENCES
By: Gina Martin
In the last year, several municipalities, including Jefferson County, Alabama; Stockton, CA; San Bernardino, CA; and Central Falls, RI,
have sought protection under Chapter 9 of the Bankruptcy Code. Chapter 9, enacted solely for municipalities, has many similarities to
Chapter 11, enacted for corporations and individuals seeking to reorganize their debts. There are several key differences between
Chapter 9 and Chapter 11. A brief summary of these differences is set forth below.
Chapter 9 filings are still relatively rare. However, if you find yourself involved in a Chapter 9 case, it is important to recognize that the
processes procedures and rights in Chapter 9 cases can vary significantly from Chapter 11 reorganizations.
Bankruptcy Concept/
Applicable Provision
Voluntary/Involuntary Petition/ §303
Eligibility/§109
Use, Sale or Lease of Property §363
Post-petition effect of security
interest
§ 552
Recourse claims
§1111/§927
Retention of Professionals § 327
Avoidance of Preferential Transfers
§547/§926(b)
Exclusivity to File a Plan
§1121/§941
Right to Reject Collective
Bargaining Agreement
§1113
Payment of Insurance Benefits to
Retired Employees
§1114
Priority Wage and Severance Claim
§ 502(a)(4)
Chapter 11 Chapter 9
Involuntary or voluntary filing to commence
case
Generally, eligibility is not challenged in
Chapter 11 as the party is presumed to be
eligible to file (exceptions to eligibility include
insurance companies, insured banks,
stockbrokers and commodity brokers)
Debtor cannot use, sell, or lease property
outside of the ordinary course without
bankruptcy court approval
Property acquired by the estate or by the
debtor after the commencement of a case is
not subject to any lien resulting from a security
agreement entered into pre-petition
A claim secured by a lien on property of the
estate is allowed pursuant to Section 502
regardless of whether the holder of such claim
had recourse against the debtor
Bankruptcy Court approval is required to retain
and pay professionals
Payments to creditors on account of an
antecedent debt made within 90 days of
petition date (one year if an insider), while
debtor is insolvent can be avoided by
trustee/debtor-in-possession (subject to
applicable defenses)
Debtor has exclusive right to file a plan for first
120 days of case (subject to termination or
extension for cause)
Limitations/protections regarding a debtor’s
right to reject a collective bargaining agreement
Section 1114 imposes certain requirements on
a debtor seeking to modify retiree benefits
Claims for wages, salaries, or commissions,
including severance entitled to priority up to
$11,725
Must be voluntary
A municipality must demonstrate that it is eligible to be a debtor
pursuant to Section 109(c), including that it is insolvent; generally
eligibility of a municipality to file for Chapter 9 protection is
contested by one or more creditors
Debtor can use, sell or lease its property without bankruptcy court
oversight
Pre-petition security interest in special revenue bonds retained
post-petition (special revenue bonds are given greater protection
in Chapter 9 than general obligation bonds)
Special revenue bondholders do not have recourse against the
debtor pursuant to §1111(b)
Bankruptcy Court approval to retain and/or pay professionals is
not required
While preferential transfers can be avoided, there is an exception
for payments or transfers of property made to bondholders
Only debtor has right to file plan – no deadline unless Bankruptcy
Court orders one
No such limitations or protections. Section 1113 does not apply in
Chapter 9
No requirements imposed on a municipality. Section 1114 does
not apply in Chapter 9
No priority for wage claims. Section 507(a)(4) does not apply in
Chapter 9
FOR MORE ANALYSIS AND COMMENTARY VISIT MUNIBK at http://blog.munibk.com/

LEWIS G. FELDMAN
PARTNER
Los Angeles | 213.426.2688
lfeldman@goodwinprocter.com
AREAS OF PRACTICE
Lewis G. Feldman is a partner in Goodwin Procter's Business Law Department and a member of the Real Estate, REITs &
Real Estate Capital Markets Group and Municipal Bankruptcy Group. He is a former member of the firm's Executive
Committee, serves as the Chair of Goodwin Procter's Los Angeles office and heads the firm's Public/Private Development
Practice. Mr. Feldman is considered to be among the nation's leading real estate and public finance attorneys, specializing in
structuring, entitling and executing large-scale financings for real estate industry participants and the public sector.
WORK FOR CLIENTS
Mr. Feldman has advised clients on more than $70 billion in debt and equity financings for market-rate and affordable
apartments, master-planned residential communities, industrial and manufacturing facilities, urban entertainment centers,
primary, secondary and university educational facilities, retail malls, hospitals, mixed-use projects, destination resorts and
hotels, brownfield remediation, green building, mitigation banks, transportation projects and all forms of public infrastructure.
PROFESSIONAL ACTIVITIES
Mr. Feldman is an active participant in many of the industry's most eminent associations and groups, including the Board of
Directors of the University of California, Los Angeles, Ziman Center for Real Estate, of which he is a founding member; the
University of Southern California, Lusk Center for Real Estate; the City of Hope Cancer Center's Los Angeles Real Estate
Industry Council; the United Way of Greater Los Angeles; the Urban Land Institute; the National Association of Real Estate
Investment Trusts; the National Association of Bond Lawyers; California's Coalition for Adequate School Housing; and the
International Council of Shopping Centers. Additionally, Mr. Feldman is an active member of the Urban Land Institute's Public
Private Partnership Council and participates on the boards of the Milken Institute California Center Advisory Council and the
Los Angeles County Housing Development Corporation. He also serves on the Board of Trustees of the Carlthorp School.
Mr. Feldman participates on the USC Gould School of Law's Real Estate Law and Business Forum Planning Committee
(2009, 2010) and is a member of Law and Politics magazine's Blue Ribbon Panel - the committee tasked with evaluating
nominees for the 2010 edition of Southern California Super Lawyer. Additionally, he is on the editorial board of the firm's Real
Estate Group's newsletter REsource: A Goodwin Procter Publication for the Real Estate Industry; is a founding editor of
Goodwin Procter's Sustainable Development blog; and is a member of Real Estate Forum's Editorial Advisory Board.

LEWIS G. FELDMAN
MEDIA AND PRESENTATIONS
Mr. Feldman is a frequent lecturer and author on real estate and finance matters. He has been a featured speaker for the
Beverly Hills Bar Association, the Building Industry Association, the California Association for Local Economic Development,
the California Redevelopment Association, the Council of Development Finance Agencies, the National Federation of
Municipal Finance Analysts, The League of California Cities, the Los Angeles County Bar Association, the USC Gould School
of Law, the UCLA School of Law, the UCLA Anderson School of Management, the UCLA Ziman Center for Real Estate, the
Milken Institute, the National Association of Bond Lawyers, the Pacific Coast Builders’ Conference, the USC Lusk Center for
Real Estate’s Economic Forecast and the Urban Land Institute. In addition, he has served as an arbitrator for the American
Arbitration Association and serves as an expert witness in high-stakes real estate and public finance litigation matters.
Articles and comments by Mr. Feldman have appeared in numerous publications, including American Infrastructure, The
American Lawyer, Bloomberg, The Bond Buyer, The California Real Estate Journal, Commercial Property News, Construction
Today Quarterly, The Daily Deal, Fixed Income Daily, Forbes, Fortune Magazine, Infrastructure Solutions, The Los Angeles
Business Journal, The Los Angeles Daily Journal, The Los Angeles Times, the NAREIT Report, The New York Times,
POWER Magazine, Real Estate Forum (including the July 2005 cover story), Real Estate Southern California, Retail Traffic
Magazine, The Sacramento Bee, The San Diego Tribune, The San Jose Mercury News, The San Francisco Recorder, The
San Francisco Chronicle, Urban Land Magazine, The Ventura County Star, The Wall Street Journal, The Washington Post
and Western Cities Magazine. Mr. Feldman is a frequent contributor to Goodwin Procter’s Municipal Bankruptcy Blog,
reporting on a range of topics currently affecting distressed municipalities.
In addition, Mr. Feldman has appeared on Fox Business News’ “Money for Breakfast” with Alexis Glick, CNBC’s “Closing
Bell” with Maria Bartiromo and KNX AM 1070’s “Business Hour with Frank Mottek.”
PROFESSIONAL EXPERIENCE
Prior to joining Goodwin Procter, Mr. Feldman was the managing partner of the Century City office of Pillsbury Winthrop Shaw
Pittman, where he headed that firm's National Public Finance Practice and its Los Angeles Real Estate practice.
RECOGNITION
Mr. Feldman has been recognized by the California Real Estate Journal as one of "California's Dealmakers" (2008) and was
recognized by the Los Angeles Daily Journal as one of the "Top 100" leaders in the California legal community (2008). He is
listed in Chambers USA: America's Leading Lawyers for Business, Best Lawyers in America in the real estate category (2000-
2012), Lawdragon's "Top 500 Lawyers in America," The Legal 500 (2008,2009), the "Leading 500 Dealmakers in America"
(2007) and is individually rated "AV" (highest) by Martindale-Hubbell.
Other notable honors include recognition in the Los Angeles Business Journal's "Best of Bar" and "Who's Who in Law" (2007);
the Los Angeles Daily Journal's "Leading Rainmakers in California" and "Top 100 Lawyers in California" (2006 and 2007);
Real Estate Southern California's "Top Southern California Real Estate Lawyers" and American Lawyer Media's "Top 100
Attorneys" in Los Angeles County (2004-2006). He has also been recognized by Law & Politics magazine as a "Southern
California Super Lawyer" (1st Edition through 2009).
Mr. Feldman also served as Bond and Disclosure Counsel to the City of Oxnard on the City's Gas Tax Revenue Certificates of
Participation (2007 Street Improvement Program), which received The Bond Buyer's "Far West Deal of the Year" award for
2008. He was also lead counsel to the California State Treasurer on the State of California's $11 billion Economic Recovery
Bonds - the largest public sector bond transaction in American history - and was awarded "Far West Deal of the Year" (2005)
by The Bond Buyer.
While attending law school, Mr. Feldman was Executive Editor of the UC Davis Law Review.

LEWIS G. FELDMAN
EDUCATION
J.D., University of California, Davis, 1982
B.A., University of California, Santa Cruz, 1978 (with highest honors)
BAR ADMISSIONS
California

EMANUEL C. GRILLO
PARTNER
New York City | 212.813.8880
egrillo@goodwinprocter.com
AREAS OF PRACTICE
Manny Grillo is a partner in the firm’s Business Law Department and chairs its Financial Restructuring Practice. He is also a
member of its Leveraged Finance Practice and co-leader of its Municipal Bankruptcy Group. Mr. Grillo represents secured and
unsecured creditors, Chapter 11 debtors and borrowers, as well as both sellers and purchasers in distressed mergers and
acquisitions. His practice encompasses both out-of-court debt restructurings and the rehabilitation and liquidation of financially
distressed businesses under Chapter 11 of the Bankruptcy Code. Mr. Grillo regularly advises banks, hedge funds, sponsors
and other financial institutions regarding insolvency and restructuring matters in complex financings and securitizations. He
negotiates distressed financing transactions including debtor in possession loans on behalf of both lenders and borrowers and
litigates contested confirmation and financing matters as well as avoidance actions and lender liability claims. Mr. Grillo is a
member of the firm’s Opinion Committee and has been a member of its Associate Review Committee and its Committee on
Racial and Ethnic Diversity.
WORK FOR CLIENTS
Mr. Grillo has represented creditors, debtors and borrowers across a variety of industries. In the financial services industry, he
represented a troubled cooperative bank in the restructuring of over $500 million of its debt; an investment fund holding debt
secured by life settlement assets in a troubled hedge fund’s chapter 11 cases; and an ad-hoc committee of second lien
creditors in the restructuring of over $500 million of secured debt of one of the largest independent futures brokerage and
clearing firms. He has represented lenders and borrowers in the real estate industry including the successful bidder in a
section 363 sale for one of the nation’s largest real estate brokerage firms; the controlling mezzanine lender in its successful
foreclosure on a portfolio of hospitality assets with a value in excess $1.5 billion; the sponsor of a portfolio of hospitality assets
concentrated in the southeastern United States in the successful restructuring of $600 million of debt; mezzanine and
mortgage lenders for both commercial and multifamily residential properties and lenders to Native American gaming
facilities. He has represented junior capital lenders to troubled borrowers in prepackaged bankruptcy cases and periodically in
their exercise of remedies. In addition, he has represented individual creditors and ad hoc groups of creditors in some of the
country’s largest bankruptcy cases, including Lehman Brothers Holdings Inc., Northwest Airlines, Delphi Corporation and
Silicon Graphics, Inc. He negotiated the unique DIP loan equity kicker in the NextWave Telecom cases that provided the DIP
lender with a premium payable in reorganized NextWave securities at confirmation after NextWave’s litigation with the FCC in
the United States Supreme Court.
PROFESSIONAL ACTIVITIES
Mr. Grillo is a member of the American Bankruptcy Institute and the Turnaround Management Association.

EMANUEL C. GRILLO
MEDIA AND PRESENTATIONS
Mr. Grillo has been the keynote speaker at the annual DebtWire Restructuring Conference. In addition, he commented and
co-authored articles on municipal bankruptcies for American City & County and for Goodwin’s MuniBK blog. He has authored
or co-authored a number of articles on topics for a variety of publications, including “Disaggregating Assets from Liabilities to
Maximize Value” in the New York Law Journal; “Bankruptcy Blues: Changes to the US Bankruptcy Reform Act Will Affect
Troubled Portfolio Companies and their Debtholders” in Private Equity Manager; “From First Dibs to the Last in Line” in the
National Law Journal, “Application of Bankruptcy Laws to Limited Liability Companies” in New York Limited Liability
Companies and Partnerships (West’s New York Practice Series). In addition, he has been a speaker and presenter for the
Practising Law Institute and Report on Business television network in Canada.
PROFESSIONAL EXPERIENCE
Prior to joining Goodwin Procter, Mr. Grillo was a partner at Torys LLP in New York City. Before that, he was a partner at
Salans/Christy & Viener. He began his career as an Honors Program Attorney in the Office of the United States Trustee for
the Southern District of New York of the U.S. Department of Justice.
EDUCATION
J.D., Fordham University School of Law, 1991
B.S.F.S., Georgetown University, 1988
BAR ADMISSIONS
New York
COURT ADMISSIONS
U.S. District Court for the Southern District of New York
U.S. Court of Appeals for the District of Columbia Circuit
U.S. District Court for the Eastern District of New York

Chief Judge Christopher Klein
Christopher M. Klein is the Chief Judge of the United States Bankruptcy Court for the Eastern
District of California. He earned JD and MBA degrees at the University of Chicago, where he
was Executive Editor of Law Review, and BA and MA degrees at Brown. He is admitted to the
bar in California, the District of Columbia, Illinois, and Massachusetts.
After completing service in the U.S. Marine Corps as an artillery officer in Vietnam and judge
advocate, he was a trial attorney in the U.S. Department of Justice, in private practice with
Cleary, Gottlieb, Steen & Hamilton, and Deputy General Counsel-Litigation of the National
Railroad Passenger Corporation. In 1988 he was appointed a United States Bankruptcy Judge
for the Eastern District of California. He was appointed to the Bankruptcy Appellate Panel in
1998 and served for ten years.
From 2000-2007, Judge Klein was a member of Advisory Committee on Bankruptcy Rules of
the Judicial Conference of the United States and the Advisory Committee on the Federal Rules
of Evidence. His bankruptcy-related publications include: Principles of Preclusion and Estoppel
in Bankruptcy Cases, 79 Am. Bankr. L.J. 839 (2005) (co-author); Bankruptcy Rules Made
Easy(2001): A Guide to the Federal Rules of Civil Procedure that Apply in Bankruptcy, 75 Am.
Bankr. L.J. 35 (2001).

William J. Nolan
William Nolan is a senior managing director in the FTI Consulting Corporate
Finance/Restructuring practice and is based in Charlotte. Mr. Nolan has worked in all areas of
corporate recovery, including working with senior management in business turnarounds and
corporate bankruptcy. He has more than twenty years of diverse financial consulting and
management experience.
Mr. Nolan has considerable experience working with senior management teams in the areas of
financial and operational restructuring, loan workouts and business planning. He has assisted
management in developing business plans, devising short to medium term financial strategies
and projections for use in troubled debt restructures, and implementing controls over cash
expenditures, overhead and operating costs.
Mr. Nolan’s diverse background extends into financial services; manufacturing; restaurants;
healthcare, and real estate wherein he has served as advisor to companies, and advised
secured creditors, and unsecured creditors committees in out-of-court and in bankruptcy
distressed situations. Mr. Nolan has considerable mortgage banking experience and has been
very active in the reorganization of many sub-prime lending concerns.
Mr. Nolan also has extensive experience in working in international insolvencies and workouts.
As a member of PricewaterhouseCoopers’ (PwC) United Kingdom insolvency practice, Mr.
Nolan gained experience in the specialized area of UK insolvency, working as a receiver and
administrator. Mr. Nolan’s UK experience included managing and selling companies, including
companies associated with Polly Peck International, one of the UK’s largest ever insolvencies.
Prior to its acquisition by FTI Consulting, Mr. Nolan served as a partner in the U.S. division of
PwC’s Business Recovery Services group. Prior to joining PwC, Mr. Nolan held an executive
financial management position with the Pizza Hut division of PepsiCo. As a financial manager of
over 300 Pizza Huts in the state of Ohio, Mr. Nolan was responsible for identifying underperforming
stores and working with local management to improve their performance as well as
developing and implementing plans to eliminate excess operating costs and preparing and
executing annual operating and financial budgets.
Mr. Nolan co-authored two articles in the American Banker entitled “The Fight for Survival: Subprime
Lending, Where to From Here” and “At What Point Are Servicing Rights Born?”
Mr. Nolan holds an M.B.A. in finance from the Wharton School of Business at the University of
Pennsylvania and a B.S. in economics from the University of Delaware. He is a member of the
American Bankruptcy Institute, the Association of Insolvency & Restructuring Advisors and the
International Bankruptcy Association. Mr. Nolan served as treasurer of the Delaware Valley
Chapter of Turnaround Management Association.
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