BIRMINGHAM, Ala. Feb 1 A lawyer for the
creditors' trustee in America's biggest municipal bankruptcy on
Friday said the trustee will not make a Feb. 1 payment to owners
of $3.14 billion of sewer debt issued by Alabama's Jefferson
Gerald Mace, an attorney for creditors' trustee Bank of New
York Mellon, told a bankruptcy court hearing that the
distribution could not be made because of a "lack of funds".
In a document filed on the Electronic Municipal Market
Access (EMMA) on Friday, BNY Mellon lists as oustanding
approximately $3.1 billion in principal of sewer revenue
warrants affected. ()
The notice explains that "certain holders of bank warrants
are not willing, at this time, to consent the trustee making
distributions of principal with respect to Sewer Warrants coming
due at maturity or resulting of mandatory sinking fund
redemption in February and early March 2013...."
The county continues to make payments from sewer-system
revenues to Bank of New York, which distributes the money to
debt owners that include Wall Street banks, insurance companies
and hedge funds, Jefferson County Manager Tony Petelos told
Lawyers for creditors and Jefferson County, which filed for
Chapter 9 bankruptcy in 2011 mainly because of overwhelming debt
on its sewer system, are battling in court over sewer fee hikes
that would go in part to service the sewer warrants.
Creditors say a 5.9 percent increase in fees authorized in
November by county officials was too low and are asking the
judge overseeing the case for clearance to press a state court
lawsuit for bigger hikes they say are needed to pay off the
JPMorgan Chase, Bank of New York and other creditors are
proposing hikes of 22 percent or more. County officials have
said the November hike would raise system revenue by $8.5
million a year and could be followed by other increases as part
of a settlement with creditors.