Alabama's Jefferson County OKs bankruptcy filing

BIRMINGHAM, Alabama Wed Nov 9, 2011 5:51pm EST

A manhole cover bears the logo/design of Jefferson County, Alabama August 9, 2011.    REUTERS/Marvin Gentry

A manhole cover bears the logo/design of Jefferson County, Alabama August 9, 2011.

Credit: Reuters/Marvin Gentry

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BIRMINGHAM, Alabama (Reuters) - Legislators in Alabama's Jefferson County on Wednesday voted 4 to 1 to file for bankruptcy court protection in what would be the biggest municipal bankruptcy in U.S. history.

Despite a tentative deal with creditors reached in September to settle $3.14 billion of debt, county commissioners this week resurrected the threat of a Chapter 9 bankruptcy filing largely because the estimated savings from the September agreement had shrunk by about $140 million.

The filing could add to heightened concerns in the $3.7 trillion U.S. municipal bond market, which has recently been hit hard by the high-profile debt crisis in Pennsylvania's capital of Harrisburg.

Creditors such as JPMorgan Chase & Co and the county in September reached a tentative deal calling for Jefferson County's sewer-system debt to be substantially reduced, but final terms were not reached.

A sticking point discussed in a commissioners' meeting on Monday was adjustment of a $140 million difference between the originally agreed-upon $2.05 billion the county must repay the creditors. That figure recently crept up to $2.19 billion.

The September agreement was seen as a turning point for Jefferson County, which since 2008 has teetered on the edge of a bankruptcy that would have surpassed that filed by Orange County, California, in 1994.

Jefferson County's debt escalated in the mid-2000s with interest and auction rate bond deals as it sought to refinance an upgrade of its sewer system.

Should Jefferson file Chapter 9 bankruptcy, at over $5 billion for the county's total indebtedness, it will be the largest municipal filing in U.S. history.

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Comments (3)
RSDallas wrote:
They are just playing hardball. They won’t file any papers.

Nov 09, 2011 5:29pm EST  --  Report as abuse
getting credit instead of taxes do not solve the problem… these republican ideas are funny to the bones…

Nov 09, 2011 6:16pm EST  --  Report as abuse
akcoins wrote:
What? The Unions aren’t to blame? I thought the Unions were the cause of all the financial problems for the cities, counties and states.

Nov 09, 2011 6:35pm EST  --  Report as abuse
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