Chocolateville Success!

The U.S. Bankruptcy Court for the District of Rhode Island yesterday afternoon approved the Chapter 9 municipal bankruptcy reorganization plan and consequent exit from bankruptcy Central Falls, just 13 months after the city filed for bankruptcy. U.S. Bankruptcy Judge Frank Bailey stated he would issue an order later formally implementing the restructuring plan. Only two of the 239 creditors voted against the plan, which would take effect in 44 days, after an appeal period. In issuing his decision, Judge Bailey stated: “Rarely does the shoe fit quite as cleanly as the shoe fits in this case, where we have had a community of pain for 13 months. From pain, it’s my sincere hope that from the confirmation of this plan of adjustment, the parties will be able to join together now in a healing process with a healthy financial community…This case was filed 13 months ago. In my limited knowledge, this is the fastest case to go in this history of Chapter 9, of real municipalities, to go from filing to confirmation…This is a record time and record efficiency. In a way, I think that this is an example not only for Rhode Island but maybe the nation on how to run a Chapter 9.” Under the agreement, Rhode Island, which seized control of the 19,400-population city more than two years ago, would transfer operations back to local officials in January. State officials could still intervene if the city fails to meet budgetary benchmarks (Rhode Island enacted fiscal distress legislation establishing a three-tiered intervention system for distressed municipalities and granting bondholders priority in a bankruptcy filing.) In addition, the U.S. Bankruptcy Court retains jurisdiction for the first five years. In the wake of yesterday’s decision, Rhode Island Governor Lincoln Chafee said: “As a result of this plan, the city will have a balanced budget until 2017 including a sustainable pension and healthcare system for retirees.”