Bloomberg News

Jefferson County Will Pay $5.5 Million a Month on Sewer Debt

February 17, 2012

Feb. 16 (Bloomberg) -- Alabama’s Jefferson County, which filed the biggest municipal U.S. bankruptcy last year, agreed to pay sewer bondholders $5.5 million a month through May while the two sides fight over a final amount, a lawyer said.

David Lemke, an attorney for the bondholders’ trustee, Bank of New York Mellon Corp., said in court yesterday that the deal will expire at the end of May, or sooner should a judge decide before then what the county must pay every month to service about $3 billion in sewer debt.

U.S. Bankruptcy Judge Thomas B. Bennett in Birmingham, Alabama, will hold a hearing in April on how much of the sewer revenue collected from residents and businesses in the county must be set aside to operate the system. Under the bond contract, any money left over after operations and maintenance must be turned over to the trustee, who then pays bondholders.

The two sides disagree about what should go into operations and maintenance costs.

“We worked out what the county believes is an interim agreement,” county attorney Patrick Darby said in court yesterday.

Jefferson County filed bankruptcy in November.

The county, state officials, the receiver and bondholders failed to implement a tentative agreement that would have required the sewer debt to be cut by about $1 billion, rates to increase and the Alabama Legislature to enact new laws to benefit the county’s finances.

The bankruptcy is tied to a sewer refinancing tainted by political corruption. In 2009, JPMorgan Chase & Co. agreed to a $722 million settlement with the Securities and Exchange Commission over payments its bankers allegedly made to people tied to county politicians to win business.

The case is In re Jefferson County, 11-05736-9, U.S. Bankruptcy Court, Northern District of Alabama (Birmingham).

--Editors: Peter Blumberg, Glenn Holdcraft

To contact the reporter on this story: Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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