UPDATE 1-Alabama county OKs standstill deal on warrants
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By Melinda Dickinson
BIRMINGHAM, Alabama, Sept 22 (Reuters) - Alabama's Jefferson County, which is trying to restructure $3.2 billion of troubled sewer-system debt, on Monday agreed to a standstill deal covering $120 million of the county's variable-rate general obligation debt.
By a vote of 4 to 1, the Jefferson County Commission endorsed a forbearance agreement until Sept. 30 with JPMorgan Chase (JPM.N) and Bayerische Landesbank BLGGgg.F for GO warrants the county sold in 2001.
The banks, in their role as liquidity facility providers, were holding the warrants, which could, if not sold to investors, ignite $20 million of accelerated debt service payments by the county this month and another $20 million early next year, according to Standard & Poor's Rating Services.
"You'd have to assume there is a lack of demand for Jefferson County debt," said Sussan Corson, an S&P analyst in New York who had not yet seen the county's forbearance agreement.
Sept. 30 is the same date a separate forbearance agreement for the county's sewer system debt expires. The county and creditors, including JPMorgan, have been haggling since February over the terms of the sewer debt. County officials have said the debt might push Jefferson County to file the biggest U.S. municipal bankruptcy since 1994.
Separately, in a news conference, one of the county commissioners, Bettye Fine Collins, said Jefferson County lawyers would respond this week with a countersuit to litigation filed last week in federal court by bond insurers. The insurers' lawsuit asks that a receiver be named to run the sewer system. (Writing and additional reporting by Michael Connor in Miami; Editing by James Dalgleish)
