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Central Falls' Plan to Return Only 45% to Unsecured Creditors

Friday, 20 July 2012 09:02
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The City of Central Falls, Rhode Island, on July 10, 2012, filed with the Bankruptcy Court a Second Amended Plan For The Adjustment Of Debts and an explanatory disclosure statement.
 
The Chapter 9 Plan, if confirmed, will restructure the City's debt and its operations and put the City on a path towards fiscal stability.  The Amended Plan also addresses and resolves the City's obligations to employees, retirees, and vendors.  The Amended Plan does not impair the City's bond obligations.
 
According to the Second Amended Disclosure Statement dated
July 10, 2012, payment to holders of general unsecured claims and general unsecured convenience claims will be paid a distribution from a pool totaling $600,000 during the six-year plan horizon.
 
The general unsecured convenience claims will be paid 35% of their allowed claim on or prior to June 30, 2013.
 
Any balance remaining in FY 2013 claims pool will be added to the FY 2014 claims pool, and the general unsecured claims will share pro rata in the claims pool on or prior to the following payment dates: June 30, 2014, June 30, 2015, June 30, 2016 and June 30, 2017.
 
In no event will the amount paid to any general unsecured creditor exceed 45% of the Allowed Claim.  In the event there are monies remaining in the General Unsecured Creditor's Pool on June 30, 2017, after distribution as stated herein, such monies will be deposited in the City's Capital Fund.
 
"While the City regrets that it cannot pay a higher percentage, the fact is that the City lacks the revenues to do so while maintaining an adequate level of municipal services such as the provision of fire and police protection and the repairing of the City's streets," the City said in the court filing.
 
The Amended Plan does not alter the City's obligations towards funds that are restricted by grants, by federal law and by Rhode Island law; pursuant to the Tenth Amendment to the United States Constitution and the provisions of the Bankruptcy Code that implement the Tenth Amendment, such funds cannot be impacted in the Bankruptcy Case.
 
In summary the Plan provides for these terms:
 
Balloting Information    Ballots have been provided with this
Amended Disclosure Statement to creditors
known to have Claims that are impaired
under the Amended Plan. Ballots must be
returned to and received by the Ballot
Tabulator by no later than 4:30 p.m.,
Eastern Standard Time, on August 3, 2012.
 
Ballot Tabulator         Theodore Orson, Esq.
Orson and Brusini Ltd.
144 Wayland Avenue, Providence, RI 02906.
Fax No. (401) 861-3103.
E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it
 
Confirmation Hearing     A hearing regarding confirmation of the
Amended Plan will be held by the
Bankruptcy Court on Aug. 17, 2012,
commencing at 10:30 a.m., Eastern
Standard Time and continuing on
Aug. 20, 2012 if needed.  Objections to
confirmation must be filed and served by
no later than Aug. 3, 2012.
 
Administrative Claims    Paid in full, except to the extent that
the Holder of an Administrative Claim
agrees to a different treatment.
 
Class 1 $12,000,000
General Obligation
School Bonds Claims      Unimpaired.  The bonds are general
obligations of the City, and all taxable
property in the City is subject to ad
valorem taxation without limitation as to
rate or amount to pay the bonds and the
interest thereon.  Pursuant to R.I. Gen.
Laws Sec. 45-12-1, the bonds are secured
by a Rhode Island statutory lien on
property taxes and general fund revenues.
 
Class 2 $8,700,000
General Obligation
Municipal
Facility Bonds Claims.   Unimpaired.  The bonds are general
obligations of the City, and all taxable
property in the City is subject to ad
valorem taxation without limitation as to
rate or amount to pay the bonds and the
interest thereon.  Pursuant to R.I. Gen.
Laws Sec. 45-12-1, the bonds are secured
by a Rhode Island statutory lien on
property taxes and general fund revenues.
 
Class 3
$1,300,000 General
Obligation School
Bonds Claims             Unimpaired. The bonds are general
obligations of the City, and all taxable
property in the City is subject to ad
valorem taxation without limitation as to
rate or amount to pay the bonds and the
interest thereon.  Pursuant to R.I. Gen.
Laws Sec. 45-12-1, the bonds are secured
by a Rhode Island statutory lien on
property taxes and general fund revenues.
 
Class 4
$750,000
General Obligation
School Bonds             Unimpaired. The bonds are general
obligations of the City, and all taxable
property in the City is subject to ad
valorem taxation without limitation as to
rate or amount to pay the bonds and the
interest thereon.  Pursuant to R.I. Gen.
Laws Sec. 45-12-1, the bonds are secured
by a Rhode Island statutory lien on
property taxes and general fund revenues.
 
Class 5
$4,250,000
General Obligation
School Bonds
Unimpaired. The bonds are general
obligations of the City, and all taxable
property in the City is subject to ad
valorem taxation without limitation as to
rate or amount to pay the bonds and the
interest thereon. Pursuant to R.I. Gen.
Laws Sec. 45-12-1, the bonds are secured
by a Rhode Island statutory lien on
property taxes and general fund revenues.
 
Class 6
April 10, 2009
Lease Claim              Impaired.  On the Effective Date, the
term of the Rescue Lease will be extended
by 2 years, the annual principal payments
will be reduced by 50%, and the annual
interest rate will be reduced by 1%.
 
Class 7
Retiree Health
Insurance Claims         Impaired.  The Holders of these Claims
will have their health care benefits
modified in accordance with the
restructured health benefits schedule,
and will be required to pay 20% co-share
premium payments.
 
Class 8
Retiree $10,000 & Under
Pension Claims           Unimpaired.  The Holders of these Claims
will not have their annual pension
benefits reduced under the newly-designed
Central Falls Pension Plan.
 
Class 9
Retiree Reduced to
$10,000 Pension Claims   Impaired.  The Holders of these Claims
will have their annual pension benefits
reduced to $10,000 under the newly-
designed Central Falls Pension Plan.
 
Class 10
Retiree 45%
Pension Claims           Impaired.  The Holders of these Claims
will have their annual pension benefits
reduced by 55% under the newly-designed
Central Falls Pension Plan.
 
Class 11
Retiree Pension Claims   Impaired.  The Holders of these Claims
will have their annual pension benefits
reduced by less than 55% in accordance
with the formula as set forth under the
newly-designed Central Falls Pension
Plan.
 
Class 12
Retiree Accidental
Disability
Pension Claims           Impaired.  The Holders of these Claims
will have their accidental disability
retirement benefits modified in
accordance with the restricted benefit
schedule.
 
Class 13 Employees
Covered by the
Collective Bargaining
Agreement between
the City and R.I.
Council 94, AFSCME,
AFL-CIO Local 1627 for
Nov. 23, 2011 to
June 30, 2016            Impaired. The Holders of these Claims
have had their compensation, healthcare,
and other benefits reduced under the
Amended Plan.
 
Class 14
Employees Covered by
the CBA between
the City and the
Fraternal Order of
Police, Lodge 2 for
Nov. 23, 2011 to
June 30, 2016            Impaired. The Holders of these Claims
have had their compensation, health
benefits, retirement benefits and other
benefits reduced under the Amended Plan.
 
 
Class 15
Employees Covered by
the CBA between
the City and
Local 1485, Int'l Assoc.
of Fire Fighters,
AFL-CIO for
Nov. 23, 2011 to
June 30, 2016            Impaired. The Holders of these Claims
have had their compensation, health
benefits, retirement benefits and other
benefits reduced under the Amended Plan.
 
Class 16 General
Unsecured Claims         Impaired. Holders of Allowed General
Unsecured Claims will receive their pro
rata share of the $600,000 payment of the
full distribution to the Holders of
Allowed Class 17 General Unsecured
Convenience Claims) during the six-year
Amended Plan duration from the General
Unsecured Claims Pool after distributions
are made to or reserves are created for
the Holders of the Class 17 Convenience
General Unsecured Claims.  Because this
class of Claims will include contract and
lease rejection Claims which are
currently unliquidated, it is impossible
at this time to estimate the percentage
recovery to Holders of these Claims. The
recovery will not exceed 45% of the
amount of the Claim.
 
Class 17
General Unsecured
Convenience Claims of
$5,000 or less           Impaired. The Holders of these Claims
will receive 35% of the amount of their
Allowed Claim on or prior to June 30,
2013 in a single lump sum payment.
 
Class 18
Property Tax
Overpayment Claims       Unimpaired.  The Holder of these Claims
will have the overpayment of their
property taxes credited to their fiscal
year 2013 tax bills.
 
Class 19
State of
Rhode Island Claims      Impaired. The Holder of this Claim will
be paid in full but most of the payments
will be paid after the term of the plan.
A portion of the payments to the Holder
of this Claim will be paid from any
recovery of a Claim Recovery Trustee to
be appointed to recover from any judgment
against elected officials in the City.
 
Contact the Debtor's counsel at:
 
Theodore Orson, Esq.
ORSON AND BRUSINI LTD.
144 Wayland Avenue
Providence, RI 02906
E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it
 
A copy of the Second Amended Disclosure Statement is available at:
 
http://bankrupt.com/misc/Central_Falls_2nd_Amended_Plan_Outline.pdf
 
About Central Falls
 
Central Falls is a city in Providence County, Rhode Island.  The
population was 18,928 at the 2000 census.  Central Falls is the
smallest and most densely populated city in Rhode Island.
 
Central Falls sought bankruptcy protection under Chapter 9 of the
U.S. Bankruptcy Code (Bankr. D. R.I. Case No. 11-13105) on Aug. 1,
2011.  The Chapter 9 filing was made after former Rhode Island
Supreme Court Judge Robert Flanders, who serves as state-appointed
receiver for the city, was unable to negotiate significant
concessions from unions representing police officers, firefighters
and other city workers.  The city grappled with an $80 million
unfunded pension and retiree health benefit liability that is
nearly quadruple its annual budget of $17 million.  Judge Robert
Flanders succeeded the role from retired Superior Court Associate
Justice Mark A. Pfeiffer, who was appointed in July 2010.  The
Central Falls receivership, the state's first, has left the mayor
and council without any power to govern.
 
Judge Frank Bailey presides over the Chapter 9 case.  Theodore
Orson, Esq., at Orson and Brusini Ltd., serves as bankruptcy
counsel to the receiver.
 
The City of Central Falls, Rhode Island, on July 10, 2012, filed with the Bankruptcy Court a Second Amended Plan For The Adjustment Of Debts and an explanatory disclosure statement.

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