The case administrator in Jefferson County, Ala.’s municipal bankruptcy case last week recommended the appointment of an unsecured creditors committee.
The county has $211.3 million of unsecured general obligation warrants and $3.7 million in unsecured trade claims, plus other kinds of unsecured debt such as leases.
The administrator said three companies responded to a request for participants willing to serve on the committee: Bayerische Landesbank, which owns $52.9 million of defaulted variable-rate GO warrants, and two others owed trade debt — Beckman Coulter Inc., $338,396, and UAB Health System, $8,725.
In an adversarial proceeding related to the bankruptcy case, the U.S. Department of Justice on Monday filed a motion to intervene in the proceeding brought by Bank of New York Mellon, trustee for the county’s $3.14 billion of defaulted sewer debt. The trustee has raised constitutional questions regarding uses of sewer revenues to pay certain expenses.
BNY Mellon has claimed that if the county uses revenues for expenses not allowed by the indenture, such as to pay bankruptcy attorney expenses, that amounts to “an unlawful taking of the property of the trustee, the sewer warrant holders, including the liquidity banks, and the insurers without just compensation in violation of the Fifth and Fourteenth Amendments to the United States Constitution.”
Bankruptcy Judge Thomas Bennett also ruled last week that a group of home owners could not file a friend of the court brief.
The homeowners complained that BNY Mellon refused to allow repairs to be done on a failing sewer line in their neighborhood and said they wanted to provide the court “with their unique perspective as property owners directly affected by failing sewer lines that have been inadequately maintained.”
Bennett said the issue outlined in the brief was duplicative of evidence and other information previously presented by other parties.
The homeowners filed their brief after Bennett held a hearing in the matter of deciding how much in sewer revenue Jefferson County can spend for operations and expenses, and how much will be dedicated to pay debt service on the sewer warrants. Bennett has not issued a ruling in the matter.