BRADENTON, Fla. - Jefferson County, Ala., can proceed with an appeal related to the county's bankruptcy exit plan, the 11th Circuit Court of Appeals in Atlanta ruled Wednesday.
The county is challenging last year's decision by U.S. District Judge Sharon Blackburn to reject the county's contention that its settled bankruptcy case cannot be unwound because the plan of adjustment has been largely consummated.
Blackburn's ruling came during an appeal of the county's Chapter 9 case.
The Securities Industry and Financial Markets Association and the National Association of Bond Lawyers said in friend-of-the-court briefs that a determination by the 11th Circuit Court of Appeals is essential to the stability of the municipal bond market and the certainty of future Chapter 9 bankruptcy cases.
The appellate court accepted those briefs on Wednesday.
The case centers on the bankruptcy court's Nov. 22, 2013 order confirming Jefferson County's plan of adjustment. The order allowed the county to proceed with the sale of $1.8 billion in sewer refunding warrants to write down $3.1 billion in related outstanding debt.
The plan contained safeguards for new bondholders, including what is believed to be a precedent-setting provision requiring that the bankruptcy court continue to oversee promises made by the county to raise sewer rates over the next 40 years to service the debt.
The confirmation plan was appealed to the district court in Birmingham by former broker-dealer Calvin Grigsby, a financial advisor and attorney representing a group of local residents and elected officials who are ratepayers on the county's sewer system.
The county sought to dismiss the appeal arguing that it was constitutionally, statutorily, and equitably moot because the debt adjustment plan was largely consummated, and because the ratepayers failed to ask the court to issue a stay that would have delayed implementation of the plan while an appeal was pending.
Blackburn ruled last September that the ratepayers could continue their challenge, and that she could find some portions of the confirmation plan unconstitutional.
A prompt review of the lower court's decision "is imperative to the continued stability and accessibility of the municipal bond market," SIFMA argued in urging the 11th Circuit to accept the county's petition,
"Accepting the petition will resolve the uncertainty caused by the challenged order about the finality and integrity of confirmed, non-stayed plans of adjustment that contemplate an emerging debtor's issuance of new bonds or warrants to finance governmental projects and operations, thereby enhancing market acceptance," SIFMA's friend-of-the-court brief said.
Similarly, NABL said in its brief that settling the uncertainty surrounding the finality of plans of adjustment "would assist other financially challenged municipalities who are considering using the Chapter 9 plan process as a way of successfully accessing the public financial markets and to purchase of bonds proposed to be issued under confirmed Chapter 9 plans."
