Alabama debt talks continue but promise no quick end
BIRMINGHAM, Alabama (Reuters) - Negotiations between creditors and Alabama's Jefferson County that could avert a bankruptcy filing are continuing but promise no quick resolution, county officials said on Tuesday.
Working against a September 30 deadline to restructure $3.2 billion of sewer debt, lawyers for the county, key creditor JPMorgan Chase (JPM.N) and possibly bond insurers were expected to meet on Wednesday in Alabama's capital, Montgomery.
Alabama Gov. Bob Riley, who two weeks ago entered the months-long talks and announced Wall Street creditors would consider a new debt restructuring plan, will not be at Wednesday's meeting, according to county officials.
A bankruptcy filing by Jefferson County, which is home to Alabama's most populous city, would be the biggest by a U.S. local government since Orange County, California, filed for protection in December 1994.
Municipal bankruptcies are rare and seldom affect essential government services.
A Chapter 9 bankruptcy filing would make the county, with its exposure to the auction-rate securities market, the latest casualty of the global credit crunch.
Jefferson County's creditors and bond insurers have not publicly reacted to the new restructuring plan, which includes a swap of existing variable-rate sewer bonds for fixed-rate bonds with longer maturities.
Unconfirmed media reports said the plan calls for no new taxes, possible hikes in sewer rates and the elimination of interest-rate swap agreements, which have aggravated the county's sewer debts.
"The meeting in Montgomery tomorrow is more about who will pay what," Jefferson County Commissioner Bettye Fine Collins said. "No settlement is expected to come out of the meeting."
Separately, a city councilman from Birmingham said on Tuesday the city should consider buying the Jefferson County sewer system.
According to an article published on the website of the Birmingham News, Councilman Steven Hoyt said such a move might limit rate increases for sewer system customers in Birmingham and elsewhere in Alabama's Jefferson County.
Hoyt, who said during a city council meeting that he would ask city officials to investigate purchasing the sewer system if the county declares bankruptcy, was not immediately available to comment.
County officials privately said such a transaction was unlikely.
Jefferson County's $3.2 billion of sewer bonds are made up of about $2 billion of auction-rate securities, $850 million of variable-rate demand notes and the remainder in fixed-rate bonds, according to Standard & Poor's Ratings Services analysts. The county so far has only defaulted on the insured variable-rate debt, which is being held by liquidity providers, they said.
(Writing and additional reporting by Michael Connor in Miami, Editing by Chizu Nomiyama)
