Jefferson County Avoids Bankruptcy Over Sewer Debt For Time Being
For the moment, Jefferson County, Alabama, has successfully avoided filing for the largest municipal bankruptcy in the United States. Jefferson County commissioners will find out next week if their proposal to restructure the county’s $3.2 billion sewer debt at lower, fixed interest rates over a longer term meets the approval of creditors.
The temporary reprieve allows the county to delay making further interest payments to lenders.
Jefferson County commissioners were joined by Alabama Governor Bob Riley when they presented the proposal at an Aug. 29 meeting with creditors. Reportedly, lenders and others involved in the sewer project plan to hold off in taking any legal action against Jefferson County until Sept. 30 while they study the proposal’s merits.
Today was a critical day for Jefferson County, with county commissioners facing the possible end of its financial road. At 5 p.m., a forbearance agreement between Jefferson County and lenders for the sewer debt was set to expire. Following months of trying to work out a new financing deal with lenders, bondholders and others - as well as having taken several forbearances to delay making interest-rate payments on the debt - county officials were set to file for bankruptcy.
A bankruptcy for Jefferson County would almost double the previous municipal bankruptcy record set in 1994 by Orange County, Calif., which had debts of $1.7 billion.
Our affiliation of securities lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.
