BRADENTON, Fla. - The Jefferson County commission was set to hold a special meeting this morning to approve a forbearance agreement and response to the lawsuit filed last week seeking a receiver for the Alabama county's troubled sewer system.
In a notice sent out Friday afternoon, commission president Bettye Fine Collins is asking the five-member commission to approve a resolution authorizing her "to execute forbearance agreements until Sept. 30, 2008, with certain of the county's general obligation creditors."
Commissioners also are expected to authorize the county's attorneys to file a response "asserting the county's actions, rights, and defenses against Financial Guaranty Insurance Co. and Syncora Guarantee Inc.," formerly XL Capital Assurance Inc., and the Bank of New York Mellon as trustee, which all filed a lawsuit last Tuesday asking a U.S. District Court judge to appoint an independent receiver for the sewer system.
Collins was not available for comment.
Alabama's most densely populated county has threatened to file what would be the largest municipal bankruptcy, which would put $4.7 billion of debt into Chapter 9, including $3.2 billion of variable- and auction-rate sewer securities. The sewer debt is also covered by $5.2 billion of swaps that reportedly would cost $250 million to terminate.
Jefferson County commissioners have been negotiating with creditors since February, when interest on the floating-rate debt soared to penalty rates as high as 10%, and repayment of the variable-rate debt was accelerated, all largely because bond insurers ratings were downgraded. In addition to the sewer debt, the county also has some of its other debt in variable- or auction-rate mode.
Creditors have negotiated half a dozen forbearance agreements delaying some debt payments. However, until now the forbearance agreements have not applied to any of the county's other debt.
FGIC and Syncora, which insure most of the sewer debt, filed suit last week, saying a receiver could enforce rate covenants and take other measures to find revenues to support debt payments.