BRADENTON, Fla. Jefferson County, Ala., officials concluded recent meetings in New York City over new bankruptcy concessions saying that additional negotiations will be necessary with major creditors of the county’s debt-laden sewer system.
“Even though progress has been made, more conversations are needed before the targeted level of creditor concessions is achieved,” said a rare joint statement Oct. 25 by commissioners David Carrington and Jimmie Stephens, who are heading up talks. “Due to the sensitive nature of the negotiations, we will have no further comment at this point in time.”
While creditors have already agreed to $1.3 billion in haircuts, the county now says $350 million of additional concessions are necessary to accomplish a refunding in December and provide capital for the sewer system and allow the county to exit Chapter 9 bankruptcy.
The latest meetings with JPMorgan, hedge funds, bond insurers, and liquidity banks holding $3.2 billion of defaulted warrants came about because rising interest rates have undermined the metrics of the refunding, which currently would offer cash settlements resulting in investor losses from 20% to 70%.
Officials did not say when negotiations would resume. A confirmation hearing on the plan of adjustment is set for Nov. 5.
Also on Oct. 25, Standard & Poor’s raised the ratings on Jefferson County’s Series 2000 limited obligation school warrants to CCC from C, and the Series 2006 lease revenue warrants to CC from C. Both ratings have stable outlooks and reflect S&P’s view that the county is likely to make full and timely payments on these obligations during the coming year.
“The CCC rating reflects our view that the Series 2000 warrants are currently vulnerable to nonpayment, and depend upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation,” said analyst Brian Marshall.
Under the plan of adjustment, the 2000 school warrants are considered “unimpaired,” which means creditors accepted the plan and are not entitled to vote on it. The school warrants are not considered impaired because the security differs from other outstanding debt. The county is current on all payments.
The CC rating on the 2006 lease revenue warrants is due to the fact that they are impaired under the plan “and we expect default to be a virtual certainty,” said Marshall.
The county entered into a new lease agreement with the Jefferson County Public Building Authority on Jan. 1, which calls for partial support of debt service from Ambac Assurance Corp. in 2016. The county’s partial debt-service payment at that time is considered a “certain default,” S&P said.