CalPERS Sues City of Compton Over Unpaid Contributions

(November 7, 2012) – The City of Compton is nearly out of money, and the California Employees’ Retirement System (CalPERS) is totally out of patience.

The $242.5 billion pension fund has filed a lawsuit against the municipality in the Sacramento Superior Court, citing $2.7 million in unpaid contributions.

Compton is not the only California city in arrears on its pension payments, but is the first to be sued over it. As of October, San Bernardino was $5.3 million in debt to CalPERS, which is the largest public pension system in the United States. The municipality, with a population of about 210,000 became one of the largest cities ever to seek protection under Chapter 9 when it filed for bankruptcy this summer, owing creditors over $1 billion.

“There are different scenarios that happen when a city or county starts getting into financial trouble, but missed payments are not a common occurrence,” Amy Norris, a CalPERS spokesperson, recently told aiCIO.

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CalPERS is also entangled with the insolvent books of another California city. Stockton is the largest American municipality ever to seek bankruptcy protection, but intends to maintain its pension contributions. However, Stockon plans to stop servicing its debt to insurer Assured Guaranty, which backed a $125 million pension-obligation bond issuance for the city. The firm now holds $161 million in exposure to the Stockton paper, and is pushing for precedence over CalPERS in repayment. CalPERS, in turn, suggested it would defend its priority position in court.

“The obligations owed to the public workers of the City have priority over those of general unsecured creditors including bondholders,” said pension system’s General Counsel Peter Mixon in a statement. “Unlike insurance companies, policemen, firefighters and other public employees are not in a position to evaluate credit risk of their employers. Assured Guaranty is in the business of evaluating these risks. CalPERS is committed to working within the legal system to reach resolution of these difficult issues.”

Compton officials explored the prospect of seeking bankruptcy protection around the same time as San Bernardino, but chose to try and claw its way back to solvency.

City Manager G. Harold Duffey told the Sacramento Bee that Compton fell behind because of a short-term cash flow problem and he expects to have the matter cleared up by the end of the year. “I want employees and retirees of the city of Compton to know that their retirement is not in jeopardy,” he said.

Duffey also told the newspaper that he had hand-delivered a check to CalPERS for nearly $1.4 million on November 2.

However, that still leaves the struggling city roughly $600,000 behind on their payments.

The lawsuit is ongoing, despite the recent payment.

(November 7, 2012) — There are currently 42 private equity- and venture capital-backed companies globally set to list in the coming weeks, seeking to raise $8.4 billion in public offerings, Preqin’s initial public offering (IPO) pipeline data reveals.

Twenty-four of the 42 companies are buyout-backed, and a further 18 VC-backed companies have currently filed for an IPO.

According to Preqin’s findings, there are currently 31 North America-based PE- and VC-backed companies in the IPO pipeline, seeking to raise $6.1 billion in listings.

“We are only in the opening weeks of Q4 2012, yet the $4 billion raised from 19 PE- and VC-backed public offerings has already provided an indication that this quarter looks set to eclipse the lows witnessed in Q3 2012, which saw the lowest levels of PE- and VC-backed IPO activity since 2009,” according to Manuel Carvalho, Preqin’s manager of private equity deals.

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Furthermore, according to Preqin, between January and October, North America-based PE- and VC-backed IPOs accounted for 61% of the number and 64% of the value of public offerings globally. “This is a marked increased in the prominence of North American IPOs, which since 2009 have typically accounted for less than half of global PE- backed IPO activity,” Preqin stated in a release.

Carvalho concluded by noting that improved market conditions have led to a wave of IPOs in October of this year. He asserted that while nothing is guaranteed in the IPO pipeline, if public market conditions (particularly in the US) remain solid in the coming weeks, then Q4 2012 could likely witness continued exit activity via the public markets for PE- and VC-backed companies.