A federal judge in Birmingham Friday scheduled a hearing on Nov. 17 in a lawsuit seeking the appointment of a receiver for Jefferson County, Ala.’s troubled sewer system, according to a report in the Birmingham News.
The county’s bond trustee, the Bank of New York Mellon, and insurers Financial Guaranty Insurance Co. and Syncora Guarantee Inc. Sept. 16 sued in the U.S. District Court for the Northern District of Alabama seeking a receiver. They claim the county has failed to comply with bond and rate covenants requiring fees to be raised to pay debt service.
Jefferson County filed a counterclaim seeking a jury trial and more than $100 million in compensatory and punitive damages against FGIC and Syncora. They insure about $2 billion of the $3.2 billion of outstanding sewer system debt.
Since February, the county has been negotiating with creditors, including bond insurers, to restructure the sewer debt, most of which is in auction- and variable-rate securities that saw penalty rates rise up to 10%. Some of the debt is now held by liquidity banks seeking accelerated repayment. The county also has $120 million of general obligation variable-rate debt being held by liquidity banks.
