BRADENTON, Fla. — A proposed restructuring of $82.5 million of lease revenue warrants sold by Jefferson County, Ala., in 2006 would not reduce any principal or interest payments to investors, according to Ambac Assurance Corp., which insures the warrants.
County commissioners for the bankrupt county this week approved a term sheet outlining a proposed agreement with Ambac that would reduce annual debt payments to $4 million and $5 million from $8.3 million. The final maturities would be extended to 2037 from 2026.
Warrant holders would see no change in their payments or maturities, according to Michael E. Fitzgerald, managing director of investor relations for Ambac.
"The principal, interest and payment schedule on the warrants was not changed, rather the underlying lease terms were modified and the maturity of the lease was extended," Fitzgerald said.
"Ambac's policy remains in place and is available to the extent it's needed to be drawn upon to meet the payments on the warrants," he added.
If the annual payments from the county are insufficient to pay debt service, Ambac will make up the difference under the terms of its policy.
Warrant holders will be paid according to the original maturity schedule. Ambac will receive payments it makes to supplement debt service by virtue of the extended maturity schedule.
Both warrant holders and Ambac would be made whole under the terms of the pending agreement.
The term sheet between the county and Ambac includes a 90-day period to negotiate final details of the restructuring agreement.
The deal would have to be approved by the bankruptcy court judge.
Jefferson County's attorney did not respond to a request for comment.
The Jefferson County Public Building Authority issued the 2006 lease warrants to build a county courthouse and jail in the city of Bessemer, which is about 15 miles from Birmingham.
The county said it would make annual payments toward the lease. The government could also reject the lease but then would be forced to vacate the courthouse and jail, according to bond documents.
In August, the county began legal action to reject the Bessemer lease under provisions of the bankruptcy code, saying that it did not have enough funds to make the debt service payments. The proposed rejection was opposed by a number of parties.
Jefferson County's attorneys recently notified the court that the county had begun negotiating "in good faith" with Ambac.
The judge presiding over the case this week approved the county's motion to extend the time it has to pursue rejection of the lease through Dec. 28.