| July 30
July 30 Alabama's Jefferson County and Wall
Street creditors are finally in talks on possible workout terms
eight months after the biggest U.S. municipal bankruptcy was
filed for $4.23 billion, lawyers said on Monday.
In Chapter 9 bankruptcy since Nov. 9, Jefferson County has
the sole right to develop an adjustment plan that could include
reductions of bonds and other debt. But U.S. Bankruptcy Judge
Thomas Bennett must sign off on a plan.
Creditors on July 10 asked Bennett to set a Sept. 28
deadline for the county to submit a plan, saying the local
government was dragging its heels on preparing a workout plan.
However, the county claims that it may need longer to come
out with a complete plan, partly because officials are working
on possibly changing sewer-usage fees that cover operating costs
and payments to the creditors.
"We are in concession negotiations related to what creditors
can expect to get out of an adjustment plan," Kenneth Klee, the
county's lead bankruptcy lawyer, said on Monday. "It will take
many months to get this done. We won't know until October or
A lawyer for the creditors, speaking on a promise of
confidentiality, confirmed creditors and the county were in
talks but declined to discuss details.
"We are in fresh negotiations," said Tony Petelos, county
manager. "We have spent a lot of time in meetings. We are
meeting with many of the creditors."
A key dispute in the talks is likely the value of Jefferson
County's publicly owned sewer system, which was the main driver
of the county's bankruptcy. Creditors now hold sewer system debt
warrants worth $3.14 billion.
But lawyers for Bank of New York Mellon, the
indenture trustee for the creditors, said on Friday they expect
the county to push creditors to accept a big reduction in the
value of the system and their warrants.
"The trustee disputes that a valuation of the system or the
net system revenue is appropriate or relevant in connection to
the county's obligations," Larry Childs and other Bank of New
York lawyers said in Friday's filing.
A hearing on the filing, which requests county financial
documents and construction contracts related to the sewer
system, was scheduled for Aug. 8 in Birmingham, Alabama.
Jefferson County in June lost a courtroom fight over the size
of payments due to creditors from the sewer system's monthly
revenues. Bennett ruled county officials had been improperly
holding back about $54 million a year.
Home of Birmingham, Alabama's business hub, Jefferson County
filed for bankruptcy after a tentative agreement with creditors
unwound. That deal might have delivered a $1 billion reduction
in the county's debts and possibly eased hundreds of government
job cuts and reductions in public services.