BRADENTON, Fla. — Jefferson County, Ala., has chosen Citi as senior underwriter for a $1.89 sewer warrant refinancing to take place in December immediately after the county plans to emerge from Chapter 9 bankruptcy.
Commissioners, voting Monday, also selected Public Resources Advisory Group as financial advisor for the offering over Public Financial Management Inc. PFM had been consulting for the county in the development of proposed structures for the refinancing later this year.
The offering is part of settlements reached with major creditors holding about $3.1 billion of sewer warrants. The plan still must be voted on by all creditors, and confirmed by the bankruptcy court.
The county has already hired Balch & Bingham LLP as bond counsel and Bradley Arant Boult Cummings LLP as disclosure counsel for the refunding transaction. Both firms work for the county advising on its bankruptcy case.
In documents detailing the settlements with major creditors, PFM had developed a possible refinancing scenario that called for the deal to include $1.417 billion of current interest bonds, $299.553 million of capital appreciation bonds, and $174.547 million of convertible capital appreciation bonds.
Though most of the county's ratings are in junk territory, Commissioner Jimmie Stephens has said that rating agencies will be asked to review the refinancing.
In the search for a senior underwriter, Jefferson County issued a request for proposals to eight of the 10 largest underwriters based on The Bond Buyer league tables, including JPMorgan. The bank is the largest holder of sewer debt, and has agreed to recover approximately 31% of its $1.218 billion investment.
JPMorgan's haircut will increase recoveries by other sewer warrant holders.
Jefferson County filed for bankruptcy in November 2011 after suffering cash-flow problems due to the loss of a legislatively authorized occupational tax that provided significant revenue for the general fund.
The tax was struck down by state courts because it was improperly advertised by lawmakers, who also refused to correct the problem.
The county also carried a total of $4.2 billion of debt it could not repay all in the form of warrants, which are similar to bonds.
In the years before the county filed for bankruptcy, Citi consulted with officials on various structures for refinancing the sewer debt. It is not clear if the investment bank assisted the county after the Chapter 9 petition was filed.