Feb 10 Jefferson County, Alabama, avoided a downgrade of its already low-rated sewer system debt after principal and interest payments due Feb. 1 were made, Standard & Poor's Ratings Services said on Friday.
S&P affirmed the debt's C rating with a negative outlook, removed it from CreditWatch with negative implications and warned the rating could still fall to D if a debt service payment is missed. D is the rating agency's lowest speculative grade rating, signifying default.
"The C rating already reflects a high degree of fiscal stress associated with the sewer system and the negative outlook reflects the potential for the results of the bankruptcy proceeding to result in some level of non-payment on the rated sewer bonds," S&P said in a statement.
On Nov. 9, after a tentative agreement with creditors unwound, Jefferson County filed for bankruptcy, saying it was overwhelmed by $4.23 billion of debt mostly caused by borrowing for its sewer system. In January, a U.S. bankruptcy court judge returned control of the system to county officials from a state-appointed receiver.
The rating agency put the county's $3.16 billion of sewer system warrants on a watch list for a potential downgrade shortly after the county filed the largest municipal bankruptcy in U.S. history.
(Reporting By Karen Pierog; Editing by Diane Craft)