Bloomberg News

Jefferson County Creditor Demands Debt Plan by Sept. 28

July 10, 2012

Alabama’s bankrupt Jefferson County should be forced to file a plan outlining how it will adjust its debts and exit bankruptcy by the end of September, creditor Assured Guaranty Municipal Corp. said in court papers.

Assured asked the judge overseeing the county’s bankruptcy in Birmingham to force officials to file a plan by Sept. 28. The request comes about one week before the county begins negotiating with creditors, county attorney Kenneth Klee said in an interview.

Before Jefferson County sought court protection from creditors, the county, state lawmakers and bondholders failed to implement a proposal to cut debt by about $1 billion. After the bankruptcy filing, state lawmakers refused to give the county permission to reimpose a tax that was struck down by the Alabama Supreme Court.

“There is thus no end in sight to the county’s delay as it continues to wait for legislative intervention,” Assured said in court papers. Assured has guaranteed repayment on some of the county’s $3.2 billion in defaulted sewer bonds.

The county hasn’t negotiated with creditors since filing the biggest municipal bankruptcy in the U.S. last year, Assured said in papers filed today in federal court in Birmingham, Alabama.

‘Scorched Earth’

“Based on the scorched earth litigation strategy of the sewer creditors, the county has not had an opportunity to negotiate a plan of adjustment,” Klee said.

The negotiations set to begin next week in Birmingham will focus on how the county can pay for future improvements to the sewer system, which doesn’t bring in enough revenue to pay the debt. The talks will probably last for months, Klee said.

U.S. Bankruptcy Judge Thomas B. Bennett is unlikely to disrupt the talks by imposing an arbitrary deadline, Klee said.

Last month, Bennett ruled that the county cannot reduce payments to sewer bondholders so that it can spend more on its aging sewer system.

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

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


Tim Cook's Reboot
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus