BRADENTON, Fla. - Jefferson County, Ala.'s biggest bond insurers yesterday said they would stand behind their policies on the major portion of the county's outstanding $3.2 billion of sewer debt, most of which is in troubled auction- and variable-rate securities on which interest rates have soared because of bond insurer downgrades.
Financial Guaranty Insurance Co. has $1.19 billion of net par exposure on Jefferson County's variable-rate debt and XL Capital Assurance Inc. has $811 million in exposure.
"If called upon, FGIC and XLCA will stand behind our unconditional, absolute and irrevocable obligation to pay interest and principal, as scheduled, on the insured Jefferson County warrants as provided under the terms of our financial guarantee insurance policies," the insurers said in a joint press release.
FGIC now is rated BBB, Baa3, and BB by Fitch Ratings, Moody's Investors Service, and Standard & Poor's, respectively. XLCA is rated BB, A3, and A-minus, respectively. Financial Security Assurance which remains triple-A rated, insures $352 million of Jefferson County's sewer debt.
"The fact that we have large exposures to Jefferson County ... led us to work together to help the county out," XLCA spokesman Michael Gormley said when asked why the two insurers decided to collaborate. "This is an extremely extraordinary situation and one of those times when extraordinary times call for extraordinary measures."
The insurers said that they engaged a team of local and national experts, including legal, engineering and finance professionals, to work with the county commission and the county's financial and legal advisers to develop a "remediation plan that will deliver long-term financial integrity and stability for the sewer system and the county."
The insurer's team consists of the Atlanta-based law firm King & Spalding LLP, New York-based Blackstone Group for financial advisory services, the engineering consultants R.W. Beck based in Texas, New Jersey municipal financial adviser Lamont Financial Services Corp., and the Birmingham-based law firm Adams & Reese LLP.
"FGIC and XLCA are keenly aware of and sympathetic to the issues currently facing Jefferson County and are developing and implementing a potential solution to the crisis the county faces," the insurers said in their joint statement.
Jefferson County officials were in New York on Monday meeting with insurers and bankers on a proposed resolution to the county's financial crisis. The county wants to apply excess sales tax revenue toward its sewer debt in return for an agreement stating that the county would not be required to raise sewer rates.
Patrick Darby, a partner in the Birmingham office of Bradley Arant Rose & White LLP, said FSA is also engaged in the negotiations, but they have a much smaller part of the deal and have separate counsel.
Darby also said late Tuesday that the county did not expect an agreement on Monday and that the insurers were reviewing the county's proposal.
Also this week, representatives of the county went to Washington, D.C., for meetings with officials at the Federal Reserve, the Treasury, the White House Economic Counsel, and Alabama's congressional representatives, Darby said.
"The meetings were purely informational," Darby said. "We did not ask for federal assistance."