Creditors of San Bernardino, California, on Wednesday challenged the bankrupt city’s plan to satisfy 100 percent of the retiree benefits it owes, claiming that obligations to the California Public Employees’ Retirement System can’t be prioritized over $50 million in pension-related debt.

A lawsuit brought by Luxembourg-based Erste Europaische Pfandbrief-und Kommunalkreditbank AG and its monoline insurer Ambac Assurance Corp. accused the city of playing favorites by resuming mandatory payments to CalPERS under a settlement with the pension giant while failing to service bonds issued back in 2005.

A cash-strapped city of around 210,000, San Bernardino has followed the tack of another bankrupt California municipality, Stockton, that elected to restructure its debts without touching its unfunded pension liabilities to the powerful CalPERS.

EEPK and Ambac are asking U.S. Bankruptcy Judge Meredith Jury to intercede with a declaration that the city’s bonds and its obligations to CalPERS must be paid off on equal terms, arguing that the two are merely different “portions” of a fundamentally identical indebtedness.

EEPK is represented by Vincent J. Marriott III, Christopher Celentino and Dawn A. Messick of Ballard Spahr LLP.

The case is In re: City of San Bernardino, case number 6:12-bk-28006, in the U.S. Bankruptcy Court for the Central District of California

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