BRADENTON, Fla. — Fitch Ratings expects to assign a BBB-minus rating to bankrupt Jefferson County, Ala.'s $105 million of general obligation warrants.

The warrants, similar to bonds, will be issued to replace the county's outstanding Series 2001B GOs, which are currently in default and held by liquidity providers JPMorgan and Bayerische Landesbank Gironzentrale. Pricing information has not been made available.

The Series 2013 GO warrants are general obligations of the county, and include its full faith and credit pledge. However, no legally available revenues are specially pledged for payment.

"The final rating is contingent upon confirmation of the county's current amended plan of adjustment by the bankruptcy court overseeing the case that would allow the county to emerge from Chapter 9 bankruptcy protection by the end of the year," said Fitch analyst Larry Levitz.

Fitch said a major credit concern is that the county lacks home rule authority, and that means decisions regarding the county's ability to raise revenues are up to the state.

"The county's inability to manage its revenue base restricts financial flexibility and creates ongoing uncertainties as to future state actions, which could be detrimental to county operations," Levitz said.

After losing an occupational tax that the Legislature refused to reauthorize after a court struck the tax down, the county "made extensive reductions in personnel and operations, cutting expenditures by about a third to match revenue declines," Fitch said. "These measures have enabled the county to maintain fiscally balanced operations although at a much reduced service level."

Jefferson County also maintained a sizeable reserve balance of $69.2 million, or 38% of spending in fiscal 2012, due largely to receiving $75 million in fees from JPMorgan's settlement of securities fraud charges with the Securities and Exchange Commission, according to Fitch. The bank did not admit or deny charges that it funneled illegal payments to government officials in order to participate in the county's 2002 and 2003 sewer refunding deals.

The $3.14 billion of sewer debt, also in default, was a major reason for the county filing bankruptcy in November 2011. Jefferson County plans to refund the sewer warrants with proceeds from a $1.7 billion offering expected to begin pricing Nov. 18.

Standard & Poor's assigned preliminary ratings of BBB and BBB-minus to the sewer deal.

A confirmation hearing on the county's plan of adjustment is scheduled Nov. 20. Jefferson County expects to exit Chapter 9 by the end of the year.

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