BRADENTON, Fla. - As Jefferson County's creditors consider a $3.2 billion sewer debt restructuring plan offered by Alabama Gov. Bob Riley, county commissioners today are expected to extend forbearance agreements that delay swap and debt payments.
Commission President Bettye Fine Collins has called a special meeting today to approve the forbearance agreements with sewer creditors until Sept. 30.
Following his initial negotiations with creditors in Montgomery on Aug. 29, Riley said that the county would be presented with a proposal from the creditors to forbear until Sept. 30 at no cost to the county.
Jefferson County's existing forbearance agreements terminated Aug. 29 after Riley refused to call a special session of the Legislature to consider helping the county implement a politically unpopular restructuring plan for its troubled sewer debt.
Riley had said creditors were expected to respond to the proposed restructuring plan last week. But on Friday, Riley's office reportedly said creditors were not expected to reply to the proposal before today.
The Birmingham News reported last week that Riley offered a restructuring plan that would require investment banks to buy back some or all auction-rate bonds, exchange variable-rate bonds for longer-term bonds that have fixed interest rates as low as 3.8%, and eliminate swap termination payments last calculated to be as much as $250 million. The only additional revenue supporting Riley's plan would be sewer rate increases of up to 2.85% annually.
The sewer debt program consists of $2 billion of auction-rate securities, $850 million of variable-rate securities now held by liquidity banks, and fixed-rate bonds. The sewer debt is now considered junk by rating agencies, as is most of the county's non-sewer debt. Jefferson County has ordered attorneys to prepare to file for Chapter 9 bankruptcy and has used the threat of a filing as leverage in negotiations with creditors.