BRADENTON, Fla. - Hillview, Ky., filed for bankruptcy last month anticipating that its largest creditor would "aggressively" challenge the petition, according to court documents.
Objections to the city's petition are due by Oct. 1.
Hillview owes Truck America LLC $11.4 million plus interest as a result of losing a long-fought court case over a soured real estate deal.
The court judgment is the largest bill listed on the city's Aug. 20 bankruptcy filing.
Bondholders are the next largest creditors as the city owes $1.78 million as part of a 2010 pool bond issued by the Kentucky Bond Corp. and $1.39 million on outstanding general obligation bonds issued in 2010.
"The city does not intend to restructure any bonds through the filing," City Attorney Tammy Baker has told The Bond Buyer.
The bankruptcy case stopped the $3,759 interest that was accruing daily on the Truck America debt, due to the automatic stay that halted city payments when the petition was filed, she said.
As of April 1, the judgment plus interest totaled $15 million that is due in full, the city said in a brief explaining why it is insolvent.
Hillview said its annual revenues range between $2.7 million and $3 million per year.
Even with all its debts, the city could have difficulty proving it is insolvent because there are options for dealing with the adverse ruling, according to Moody's Investors Service.
"The city under state law can issue bonds to pay for losses in legal judgments, and Kentucky courts can order periodic payment of the judgment over a period not to exceed 10 years," Moody's, which does not rate the city, said in an Aug. 31 comment.
Moody's also said that Hillview has considerable ability to increase its two largest sources of operating revenue: occupational license taxes and property taxes.
Standard & Poor's lowered its rating on the Hillview's GO debt to B-minus from BB-plus after the city filed for protection.
The city said in an Aug. 28 court filing that its current budget anticipates $3.2 million in revenues. It includes $100,000 payment on the judgment even though Truck America has not agreed to a payment plan.
"The city has been and continues to review its cash flows, revenue sources, and regular expenses to formulate potential methods to satisfy the judgment over time along with all of its other regular obligations," the filing said.
General parameters to satisfy the judgment have been developed, the city said, adding that it wants to enact a plan to deal with the debt through its bankruptcy case.
Hillview, about 17 miles south of Louisville, covers 3.3 square miles and has about 8,000 residents, according to the U.S. Census' 2014 estimate.
It is the first municipality in Kentucky to file for bankruptcy.
