BRADENTON, Fla. — A trustee and an insurer for Jefferson County, Ala.'s defaulted general obligation warrants Tuesday objected to a motion asking the federal judge overseeing the bankruptcy case to set a deadline for the county to file a plan of adjustment for its debts.
Wells Fargo Bank NA and National Public Finance Guarantee Corp. objected to setting a deadline, as well as Jefferson County.
Last month, Assured Guaranty Municipal Corp. complained that the county was delaying the bankruptcy case by failing to propose sewer rate increases.
Assured, which has a net exposure of $731.8 million to the county's obligations, mostly related to the defaulted sewer warrants, asked the court to set a deadline of Sept. 28 for the county to propose a plan of adjustment.
A hearing on the request for a deadline is set for next Wednesday in Birmingham.
As the trustee for $105 million of unsecured, general obligation variable-rate demand warrants sold in 2001, Wells Fargo said Assured's request for a deadline is "not realistic or appropriate from the perspective of unsecured creditors," who still need information about the county's finances, assets and obligations.
"The trustee welcomes the opportunity to engage in meaningful negotiations with the county in an attempt to work toward a consensual plan of adjustment," Wells Fargo said.
National insures the remaining $95.5 million of outstanding GO warrants sold in 2003 and 2004, which are in fixed-rate mode. The GO insurer said setting a plan deadline is premature and not in the best interest of creditors.
National also said that it plans to participate fully in the formulation of a feasible plan. To do that, "National needs the county's cooperation," the insurer said, adding that it also needs information about the county's financial condition.
Assured, whose motion for a plan deadline was filed July 10, also complained that the county had not negotiated with creditors since filing the largest municipal bankruptcy in U.S. history last November.
Since then, county officials have said they are negotiating with creditors. It is not clear, though, if those negotiations are solely related to the sewer debt.
"The county neither desires nor intends to stay in bankruptcy any longer than absolutely necessary," attorneys for Jefferson County said in filing Tuesday.
Since filing for bankruptcy, the county said it has done everything it can to move the case forward, though it has been saddled with an "avalanche of litigation initiated by sewer creditors, including Assured."
Assured's motion for a plan deadline "is yet another unnecessary and costly distraction that diverts the county's attention from working on the very plan of adjustment," the county said.
Wells Fargo said it did not appear that the county could file a plan acceptable to the court by the proposed deadline because the county still needs financial assistance from the state and the Legislature.
As an underlying reason why a deadline should be ordered by the court, Assured said that the Legislature debated fiscal relief measures earlier this year, and failed to enact any. Those unsuccessful measures were aimed at producing additional revenue for the county's general fund, which had lost a significant source of revenue when state courts struck down an occupational tax.
"There is currently no indication that legislative action is coming," Assured said. "There is thus no end in sight to the county's delay as it continues to wait for legislative intervention."
Wells Fargo said the question is whether the county can ever file a feasible plan.
"If the court ultimately determines that the county is unable to submit a confirmable plan within a reasonable time, and the delay is prejudicial to creditors, the alternative is dismissal of the bankruptcy case," the trustee said.
If the case is dismissed, Wells Fargo said it would pursue its rights outside of bankruptcy court.
In addition to the plan deadline issue at next Wednesday's hearing, the court also will begin consideration of a $1.63 billion claim filed by a group of elected officials and residents in Birmingham, who are also seeking to have their case certified as a class action on behalf of all of the county's sewer system customers.
The claim is based on a theory that the sewer warrants are illegal because of "complicit financial wrongdoing," and unjust enrichment on the part of "certain bank warrant holders, credit enhancers, lenders and interest rate swap participants and sundry professionals."
The claimants are represented by Calvin Grigsby, president of broker-dealer firm Grigsby & Associates Inc. who is also an attorney.
On Tuesday, Jefferson County opposed certification of the class action in a court filing, saying that it was premature and improper.
