BRADENTON, Fla. — If Jefferson County, Ala., gets the federal bankruptcy court to approve its exit plan, 10 "adversarial" suits within the Chapter 9 case, including two filed by sewer system ratepayers, will vanish.
The court's OK of the plan would also eliminate 19 cases pending before the 11th Circuit Court of Appeals, as well as all disputes and appeals related to the sewer system's debt and swaps, and litigation between the county and JPMorgan, according to a modified plan of adjustment and related documents filed Wednesday.
"The comprehensive, full, and final resolution of these issues under the plan provides for a fair, reasonable, and equitable result and greater distributions to the county's creditors, and offers the county and its sewer system a 'fresh start' from a history plagued by actual and potential litigation," attorneys for Jefferson County said.
A hearing seeking confirmation of the plan of adjustment is set for Nov. 20.
The plan contains a global settlement of pending litigation, authorizes restructuring $3.14 billion of sewer system warrants at a loss to investors, and makes provisions for paying most, or all, of the remaining $960 million of general obligation, school, and lease warrants.
Most creditors holding the sewer system debt, who expect to receive an average of about 50 cents on the dollar, voted to accept the plan, according to court documents. Less than $18 million in claims voted to reject the plan.
"The overwhelming creditor support for the plan is further demonstrated by the fact that not one holder of any of the county's debt securities or any other legitimate creditor filed an objection to confirmation of the plan," documents said.
The county said it will file certification of votes on the plan by Nov. 15.
"Through the settlements and compromises contained in the plan, the county will be able to address and resolve years of costly and complex litigation and avoid substantial further litigation involving the sewer system and its indebtedness, restructure its indebtedness on viable terms, and emerge from its Chapter 9 proceedings," the court filings said.
Among the suits to be dismissed by confirmation of the plan is Jefferson County's litigation against JPMorgan, which was pending when the county filed for bankruptcy in November 2011. The suit charged the bank, and others involved in corruption surrounding the debt-laden sewer system, with fraud and conspiracy.
The county sued in 2009 after JPMorgan settled allegations of securities violations brought by the Securities and Exchange Commission The bank did not admit or deny guilt. Ultimately, the county was paid $75 million through the SEC's settlement with the bank.
JPMorgan, the county's largest creditor of the sewer system, has agreed to take the biggest loss of all creditors and will receive about 30 cents on the dollar.
At the heart of the county's plan is restructuring of the sewer system debt and related claims such as insurance payments and elimination of swaps.
Sewer system creditor concessions of about $1.5 billion for all claims will "substantially" reduce the amount of the county's sewer system-related indebtedness from $3.1 billion to $1.738 billion, the county told the court.
Jefferson County also asked the court to dismiss two ratepayer lawsuits, including a related complaint pending in state court. The plan also seeks to bar future claims from parties that did not agree to settlements.
Attorneys for the ratepayers have objected to the plan, and are expected to be heard during the Nov. 20 hearing. The county said it expects to file a response to their objections by Nov. 13.
