* Jefferson County deals include haircuts for JPMorgan,
* Agreements should speed end of landmark bankruptcy
* County sees $200 million in savings over 2011 agreement
By Melinda Dickinson
BIRMINGHAM, Ala., June 4 Creditors holding most
of the massive sewer debt that bankrupted Alabama's Jefferson
County have agreed to deals that could help end the largest U.S.
municipal bankruptcy, with JPMorgan Chase & Co agreeing
to a $842 million "haircut."
The deals, approved on Tuesday by county commissioners,
appear to clear a path for the county to win acceptance by a
federal judge of a workout plan to resolve the landmark $4.2
billion bankruptcy, filed in November 2011.
If implemented, the workout and the deals would impose the
largest losses on municipal bondholders by a big U.S. local
government since the 1930s.
JPMorgan, a big holder of the county's $3.1 billion of sewer
warrants, agreed to give up about $842 million of the $1.218
billion of sewer debt it holds, according to a county document.
A spokesperson for JPMorgan declined to comment.
In addition, JPMorgan gave extra, unspecified concessions to
minimize the losses of other sewer creditors, according to a
county terms sheet.
JPMorgan in 2009 paid $75 million to the county and agreed
to drop credit-default swaps claims valued at $657 million as
part of a settlement with federal regulators over secret
payments connected to Jefferson County bond deals.
"In all, JPMorgan will give up about 88 percent of its total
claims related to the sewers," the county said.
Bond insurers Financial Guaranty Insurance Co (FGIC),
Assured Guaranty Ltd and a unit of Syncora Holdings Ltd
also signed "plan support agreements," as did seven
hedge funds, the county said.
Together, these creditors hold about $2.4 billion of
Jefferson County sewer warrants that were a key driver in the
county's bankruptcy, which was partly caused by local corruption
and loss of a local tax.
A spokeswoman for Assured had no immediate comment, and
representatives for FGIC and Syncora could not immediately be
reached for comment.
As part of the agreements, the county will raise sewer rates
by 7.41 percent a year over four years and the creditors will
receive $1.835 billion. The county will also refinance the sewer
The county, which has struck smaller agreements with other
non-sewer creditors, is readying a plan of adjustment that must
be approved by a federal bankruptcy judge before the local
government can leave bankruptcy protection.
Officials of Jefferson County, home to Birmingham, a
regional business center, have in recent months struck deals
with general obligation and other non-sewer creditors but before
Tuesday reported no progress with sewer creditors.
In the Chapter 9 municipal bankruptcy, the county had
exclusive authority to hammer out settlement terms. And while
the terms must be considered equitable to creditors, a federal
judge approving a plan of adjustment can force dissenting
creditors to accept debt restructurings and other terms.
County officials said they now have owners of nearly 80
percent of the sewer debt in negotiated deals, which should cost
the county $200 million less than a tentative $2.05 billion
agreement reached but never implemented in 2011.