While Jefferson County, Ala., works to extend forbearance agreements that expire Friday, the county’s trustee has said that defaults have occurred on the county’s sewer debt.

County Commission President Bettye Fine Collins Monday said that negotiations are under way that would allow the county to pay $10 million toward its accelerated repayments on non-sewer general obligation warrants and $10 million toward the troubled sewer debt in return for forbearance extensions. The commission is expected to consider extension agreements later this week.

Meanwhile, the county has been notified by its sewer warrant trustee, the Bank of New York Mellon, that existing violations of indenture covenants will become events of default if not cured within 30 days of the notice, which was Oct. 15, according to a material event notice filed by the county through Digital Assurance Certification LLC.

Claims that Jefferson County is in default are part of the basis of a lawsuit filed in federal court by the trustee, Financial Guaranty Insurance Co., and Syncora Guarantee Inc. They are asking a federal judge to appoint a receiver for the sewer system.

“The county has denied the existence of such covenant defaults and events of default in its answer to the complaint filed by the plaintiffs,” the material event notice said.

However, the trustee in its letter cited a number of covenant defaults, including the failure of the county maintain sewer rates to pay debt service.

In addition, the trustee said Jefferson is in default for failing to pay $87.5 million in principal installments that were due in June, August, and October pursuant to terms of the indenture and certain standby warrant purchase agreements.

The county has been in negotiations since February attempting to restructure nearly $3.2 billion of sewer warrants, most of which are in troubled variable- and auction-rate mode.

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