Alabama county could pay $10 mln on warrants-official

By Melinda Dickinson

BIRMINGHAM, Alabama, Oct 23 (Reuters) - The president of Alabama's Jefferson County Commission said on Thursday the county could make a $10 million payment on $120 million of general obligation warrants if an existing standstill agreement was extended.

Jefferson County is already struggling to restructure $3.2 billion of sewer debt and faces an Oct. 31 deadline to restructure or repay $120 million of general obligation warrants.

At a news conference, Commission President Bettye Fine Collins said negotiations on the general obligation warrants were continuing between JPMorgan Chase, Bayerische Landesbank Gironzentrale and county officials.

A payment of $20 million on the 2001 warrants was due on Sept. 15. The county was unable to make the payment, and a forbearance was extended to Oct. 31.

Collins said that if creditors accept the county's offer on the warrants, an approximately $10 million payment could be made as negotiations go forward.

The next payment comes due in March 2009, and money for it will be addressed through county budget cutbacks, according to Collins.

The county is already running up against an Oct. 31 expiry on a standstill, or forbearance, agreement covering default penalties tied to the sewer debt. But local officials have said that standstill was likely to be extended.

In a deal being promoted by Alabama Gov. Bob Riley, creditors have tentatively agreed to $1 billion of sewer-debt forgiveness in exchange for sewer rate hikes and other changes in the sewer system that must be approved by state legislators.

Jefferson County, which is home to Alabama's largest city, Birmingham, has been teetering since February on the brink of what could be the largest municipal bankruptcy in U.S. history because of its sewer debt. (Writing and additional reporting by Michael Connor in Miami; Editing by Dan Grebler)