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Alabama county eyes bankruptcy-exit plan this year
August 30, 2012 / 9:35 PM / 5 years ago

Alabama county eyes bankruptcy-exit plan this year

BIRMINGHAM, Ala., Aug 30 (Reuters) - Alabama’s bankrupt Jefferson County is continuing talks with creditors and aims to have a workout plan in place by the end of 2012, the county commission’s president said on Thursday.

David Carrington, the county’s top elected official, had forecast in the past that a plan of adjustment, or a roadmap for exiting Chapter 9 bankruptcy court protection, might not be ready until late 2013.

Analysts have predicted Jefferson County, which filed its landmark $4.23 billion bankruptcy last November, might need years to hammer out a plan to exit the biggest-ever U.S. municipal bankruptcy.

“It is our goal to have a plan by the end of the year,” Carrington said in an interview on Thursday. “I am not going to say dogmatically it will happen.”

Some of the county’s creditors argue that Carrington and other officials are moving too slowly on fixing the county’s finances, such as pushing ahead with rate increases for customers of Jefferson County sewer system, which is at the center of its bankruptcy.

The bankruptcy was also driven by a 2011 court ruling that killed a local payroll tax worth about $60 million a year to Jefferson County, which has laid off hundreds of workers and reduced medical and other government services.

Bond-insurer Assured Guaranty Municipal Corp, which has $709 million of exposure to defaulted Jefferson County sewer-system warrants and other debt, has asked the federal judge overseeing the case to set a deadline for the county to submit an adjustment plan. He has so far not done so.

Talks between the cash-strapped county government and creditors, including large Wall Street companies such as JPMorgan Chase, were continuing, Carrington said.

“Some negotiations are going better than others. I don’t know any group of creditors we are not in talks with,” Carrington said. “We are trying to establish the lowest common denominator and start from there. We are trying to find common ground.”

Jefferson County’s workout plan, which must be judged fair to creditors and reasonable in light of its finances and obligations, must be approved by U.S. Bankruptcy Judge Thomas Bennett and can include reductions in bonds and other debt.

Jefferson County -- whose seat of government is the city of Birmingham -- on Nov. 9 filed for bankruptcy after a tentative agreement with creditors fell apart. 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.

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