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Legislation Opens a New Chapter for Municipal GO Bondholders in California

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July 27, 2015

Client Alert
In a move intended to fortify the rights of holders of California municipal general obligation debt as well as lower borrowing costs for California municipalities, California Governor Jerry Brown signed SB 222 into law earlier this month. This provision, which creates a first lien priority for general obligation debt issued by California’s municipalities, was designed to create additional protections for holders of municipal general obligation debt in the event of a municipal bankruptcy under the U.S. Bankruptcy Code. The anticipated result of this new law is a greater likelihood that California municipal general obligation bondholders are paid in full even if the issuing municipality files for bankruptcy protection.

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