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Alabama county to default by tapping bond reserve
March 30, 2012 / 6:01 PM / 5 years ago

Alabama county to default by tapping bond reserve

BIRMINGHAM, Ala., March 30 (Reuters) - Alabama’s Jefferson County will technically default on another $6.38 million payment by using bond reserves to pay for the financing of a new satellite courthouse, a county official said on Friday.

Jefferson County, which on Nov. 9 filed a $4.23 billion municipal bankruptcy, the nation’s biggest, said o n W ednesday it would skip a $15 million payment on general obligation warrants due April 2. The county has about $200 million of GO debt. For details, please see.

“This is more about how it works. The bond reserve is the first thing you hit if there is not enough cash to make payments,” said Jefferson County Commissioner Jimmie Stephens, who chairs the county’s finance committee.

The satellite courthouse in Bessemer is constitutionally mandated and is considered an essential service, according to Stephens. It was financed with $86 million of lease warrants. A new jail built in the 2009 renovation has never opened due to a lack of funds, but the courthouse is operating.

In November, Jefferson County filed for bankruptcy protection after bargaining for years with creditors to reduce $3.15 billion of sewer debt. Four former county commissioners were found guilty in a scandal tied to the sewer financing.

Separately, lawyers for Financial Guaranty Insurance Corp asked the federal judge overseeing the Jefferson County bankruptcy case to allow hikes in sewer rates that would increase revenues pledged to the system’s $3.14 billion of defaulted sewer warrants. The bond insurer said in court papers it insures about $1.6 billion of sewer warrants

Reporting By Verna Gates; additional reporting by Michael Connor in Miami; Editing by Dan Grebler

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