S&P Reverses Course on JeffCo School Warrants, Upgrades to BBB

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SAN LUIS OBISPO, Calif. — Standard & Poor's has upgraded six series of Jefferson County, Ala. limited obligation school warrants to investment-grade BBB from D.

The action Dec. 20 came after the ratings agency revisited amendments to documents covering the warrants as the county emerged from bankruptcy.

"We believe that the document amendments did not result in a distressed exchange between the county and its creditors for these warrants," Standard & Poor's wrote in its Dec. 20 news release. "Moreover, the county has honored and continues to honor its obligation to warrant holders."

S&P had issued a brief statement Dec. 11 stating that it lowered the ratings to D, the lowest rung on the rating scale, indicating payment default, from B on the county's Series 2004A, 2005A-1, 2005A-2, 2005A-3, 2005A-4, and 2005B warrants.

Standard & Poor's said there had been "a distressed exchange" between the county and its creditors for these warrants, citing 2005B variable-rate demand warrants were held by Depfa Bank PLC after failed remarketing. In its bankruptcy exit plan, the county reportedly negotiated a restructuring agreement with Depfa to reduce the interest rate on the 2005B warrants acquired as standby purchase provider.

The downgrade to D provoked questions from a county leader and investors, who noted that Jefferson County had remained current on the debt in question through its bankruptcy and expected to continue doing so.

Standard & Poor's assigned a stable outlook to the warrants at the new BBB rating.

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