Aug. 02--A big creditor in the Stockton municipal bankruptcy says CalPERS is getting a sweetheart deal while the creditor takes a beating.

Assured Guaranty, a Bermuda bond insurer, complained in a statement this week that Stockton, which agreed in June to file for Chapter 9 bankruptcy, is reneging on its payments to bondholders while continuing to make pension payments to CalPERS.

By halting payments to bondholders, Stockton is leaving Assured holding the bag for around $100 million.

Assured said Stockton should be scaling back employee benefits rather than withholding payments from bondholders. What Stockton is doing is "unprecedented, a contortion of the bankruptcy process," the company said.

Stockton sold bonds to pour $125 million into CalPERS pension benefits. City officials complain that investment is now worth $100 million because of CalPERS' investment woes.

Assured isn't sympathetic. "If Stockton is disappointed with CalPERS' investment performance, it should be taking that up with CalPERS rather than reneging on the city's obligation to holders of the pension bonds," the company said.

CalPERS, however, said Stockton is correct to keep funding the pension system. "The obligations owed to public workers of the city have priority over those of general unsecured bondholders," said Peter Mixon,

CalPERS' general counsel, in a statement emailed to reporters. "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."

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