BRADENTON, Fla. - The Jefferson County, Ala., Commission yesterday unanimously approved new forbearance agreements delaying swap and debt payments to creditors, while trying to negotiate an agreement to restructure the county's $3.2 billion of sewer debt, which is mostly in troubled auction- and variable-rate securities.
Creditors agreed to refrain from taking any action against the county on payments due until Sept. 30, at no cost to the county, said commissioner Jim Carns, who added that the next step is also up to creditors.
"We're waiting to hear from Wall Street, really," Carns said, referring to a restructuring plan offered by Alabama Gov. Bob Riley, who stepped into the months-long controversy in recent weeks in an attempt to avert the nation's largest municipal bankruptcy filing.
Riley and the commission's newly hired law firm, Bradley, Arant, Rose & White LLP, on Aug. 29 offered the county's major creditors a restructuring plan that reportedly would mean the county's investors would have to accept losses.
Carns said he anticipates hearing creditors' reaction to the plan possibly by Wednesday.
When asked how he would react if creditors put forth a counteroffer, Carns said: "My statement is they need to take what's on the table. They did not take a generous offer we presented to them earlier this year, so if they don't take what's on the table now, they are seriously looking at Jefferson County filing Chapter 9."
No one has officially released details of the governor's plan, but a copy apparently was leaked to the Birmingham News last week. The paper said the plan would require investment banks to buy back some or all of the county's auction-rate bonds, and exchange variable-rate bonds for longer-term bonds with fixed interest rates as low as 3.8%, and to concede as much as $250 million in swap termination payments.
The only additional revenue supporting Riley's plan would be sewer rate increases of up to 2.85% annually. That has angered a number of local residents on the sewer system who have seen their rates rise 329% since 1996, when the county agreed in a federal consent decree to repair failing sewer systems polluting local waters that serve as a source of drinking water for the area.
County commissioners have authorized their attorneys to prepare official papers for a bankruptcy filing in an effort to use that threat as leverage in negotiations with creditors.
The sewer debt program consists of $2 billion of auction-rate securities, $850 million of variable-rate securities now held by liquidity banks, and fixed-rate bonds.
"I'm hoping by Wednesday we'll have something to talk about and move forward on a positive note," Carns said yesterday.
The sewer debt is now considered junk by rating agencies. Standard & Poor's downgraded nearly all of Jefferson's non-sewer debt less than two weeks ago, saying the action reflected a greater probability that the county would proceed with a bankruptcy filing. Moody's Investors Service downgraded the county's non-sewer debt to junk status in early August.