Birmingham, the seat of Jefferson County, Alabama, plans to sell $19.4 million in taxable debt as soon as this week after the county reached an agreement to pay its largest creditors 60 percent of what they’re owed.
The city is offering the general obligations to refinance debt, deal documents say. The municipality of 212,000 has $466 million in outstanding general-obligation bonds and warrants, according to the documents. Officials anticipate saving $1 million from the issue, Tom Barnett, Birmingham’s finance director, said by telephone.
Moody’s Investors Service rates the debt Aa2, third-highest, saying the city draws from a “large, regionally significant economy.”
JPMorgan Chase & Co. (JPM:US), seven hedge funds and a group of bond insurers -- who hold about 78 percent of the county’s sewer debt -- agreed to a deal that would give them $1.84 billion, county attorney Kenneth Klee said June 5. The county filed for protection from creditors in November 2011, in the nation’s biggest municipal bankruptcy, because of a failed sewer financing.
Barnett said he didn’t expect the resolution to affect the city’s deal because “nothing’s been approved.” A bankruptcy court must sign off on the settlement.
Declines in fixed-income, led by Treasuries on signs of a strengthening economy, are more likely to influence the pricing, Barnett said. Yields on benchmark 10-year Treasuries have risen the past six weeks.
“The taxable market has traded off a bit,” Barnett said. Taxable munis rated AAA and maturing in 10 years yield 2.69 percent, the highest since October, according to Bloomberg data.
Birmingham taxable Build America Bonds due in February 2037 were valued last week at 2.61 percentage points over comparable-maturity Treasuries, compared with a spread of 2.7 percentage points on Dec. 31, BVAL pricing analysis shows.
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