Assured Joins JeffCo Sewer Motion

Assured Guaranty Municipal Corp. on Monday joined Bank of New York Mellon in filing a motion seeking relief in Jefferson County, Ala.'s bankruptcy case after the county proposed minimal sewer rate increases that some believe may not support the outstanding $3.1 billion of debt.

BNY Mellon, trustee for the sewer warrants, has asked the judge to lift the automatic stay that currently prevents creditors from pursuing a legal challenge against the county. If the bankruptcy judge agreed, creditors could as a state court to impose different sewer rates.

"If the relief requested in the motion is not granted, Assured will be harmed by the county's continued refusal to raise sewer rates in accordance with Alabama law," the insurer said. "Because of the county's continued inaction and failure to comply with state law, Assured finds itself confronted with the payment of millions of dollars in claims, in addition to what Assured has already paid to warrant holders, as a result of the continued shortfall in net revenues available to pay such warrant holders."

While the county has said a new rate structure was devised in accordance with state law, Assured Guaranty said that Alabama law also supports judicial challenges to sewer rates while authorizing the county to set sewer rates.

The Alabama code also provides that the county is obligated to perform under covenants relating to the issuance of sewer warrants, said the insurer's court filing. The code states that the pledge of funds for the payment of the principal and interest on warrants issued by any county, along with any covenants related to the pledge, "shall have the force of contract between such county and the holders of such warrants."

Assured also said that there is precedent in Alabama with state courts ordering utilities to set certain rates.

Last Friday, an "ad hoc" group holding $676 million of Jefferson County's sewer warrants also said the county has failed to propose reasonable sewer rate increases that protect their holdings. They asked for relief, and previously Financial Guaranty Insurance Co. filed a similar request.

Bankruptcy court Judge Thomas Bennett had scheduled a hearing Thursday on the requests by the trustee and FGIC.

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Bankruptcy Alabama
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