BRADENTON, Fla. — The federal judge in Jefferson County, Ala.’s bankruptcy case Wednesday will hear arguments about setting a deadline for the county to propose a plan of adjustment.
Assured Guaranty Municipal Corp. wants Judge Thomas Bennett to order the county to propose a plan by Sept. 28, 2012, and argued in a brief Monday that “the county has not set forth any time frame, even a broad one, within which it will be able to propose a plan.”
Assured said Jefferson County provided “irrelevant and disingenuous excuses” in its objection to formulating a plan under a deadline.
The insurer and other creditors have claimed that Jefferson County has not begun negotiating with them about the repayment of debt to support a plan of adjustment, which includes $200.5 million of unsecured general obligation warrants on which the county has defaulted.
In recent weeks, Jefferson County’s bankruptcy attorney said that negotiations had kicked off, though much of the talks are with creditors of the county’s $3.14 billion of defaulted sewer warrants and pertain to the allowable uses of sewer revenues.
Assured, pointing out that the negotiations are unrelated to a plan of adjustment, has a net exposure to the county’s debt of $708.7 million, most of which involves the sewer warrants.
The insurer said it would continue to make payments on its policies, and as potentially one of the largest creditors, “it appears to be the only solvent insurer that will be left ‘holding the bag’ at the end of this case.”
At Wednesday’s hearing, Bennett will also hear the first arguments in a $1.63 billion claim sought by 14 local residents and public officials who are asking to add more than 130,000 people to their case who pay taxes and other assessments as customers of Jefferson County’s sewer system.
The “Royal Ratepayers Claimants” refers to Birmingham City Council President Roderick Royal.
Birmingham is the seat of Jefferson County.
Royal, Birmingham City Council member Steven Hoyt, and Alabama state Reps. John Rogers and Mary Moore are among the claimants who are trying to assert that the sewer warrants and associated swaps were illegally issued, and that the county should be repaid $1.63 billion.
Jefferson County objected to the claim, saying it was premature, improper, that the claimants lack standing and that they failed to establish the factors required for class certification.
The Bank of New York Mellon, the trustee for the county’s sewer warrants, called the case an “attempt to pursue frivolous claims.” BNY Mellon said similar claims were brought by the same group, and were unsuccessful, in a state court case.
In a filing Monday, the Royal Ratepayers said they filed the claim and requested class certification because the county has “failed to seek this recovery.”
“Even if the county thinks the Ratepayers’ proof of claim is farfetched, spending the ratepayers’ sewer user fees to fight a claim that contributes to the estate’s ability to consolidate its debts and emerge from bankruptcy appears wantonly lacking in concern for the Jefferson County citizens, taxpayers and ratepayers who are already paying upwards of $10 million a year for legal and similar professional services,” the filing said.
The group’s brief went on to say that the county’s objection to the claim “is a complete abdication of the county’s fiduciary duty to its constituents, demonstrating even more definitively why the separate class certification for the ratepayers is needed to conclude the administration of this estate.”
The claimants contend that the sewer warrants were issued in violation of the sewer warrant’s indenture and Alabama state law.
