BRADENTON, Fla. - Jefferson County, Ala. has been notified that JPMorgan and Bear Stearns & Co. terminated swaps related to the county's troubled sewer debt on March 3.
JPMorgan and Bear Stearns - which was acquired by JPMorgan a year go - calculated the swap termination payments owed by the county at $647,804,118 and $9,060,896, respectively, according to a material event notice obtained from Digital Assurance Certification LLC.
Jefferson County has $3.2 billion in outstanding sewer debt, most of which is in auction- and variable-rate mode now held by banks. The county has been trying to negotiate restructuring of the debt for more than a year, and has a series of forbearance agreements in place delaying debt and swap payments.
The swaps terminated by JPMorgan last week cover a notional amount of $2.85 billion of sewer debt, while Bear Stearns' swaps cover a notional amount of $1.57 billion, which includes two forward-starting swaps for which the county received an upfront payment.
County officials could not be reached for comment. JPMorgan could not be reached for comment.
It is not clear from the county's material event notice if the termination payments calculated by JPMorgan include regular swap payments Jefferson has not made since last year.
"The county has not made any periodic payments with regard to the interest rate swap transactions with JPMorgan or Bear Stearns since the date of the original swap forbearance agreement, and net payments from the county to JPMorgan and Bear Stearns will be due upon expiration of the swap forbearance agreement in addition to the termination payments," the material event notice said.
The county has negotiated forbearance agreements delaying swap payments since March of last year with JPMorgan, Bear Stearns, and Bank of America. Those agreements are now slated to expire on April 20.
A forbearance agreement with Lehman Brothers Special Financing Inc. expired Nov. 17 and has not been extended. Lehman, which is in bankruptcy, entered one swap with the county covering a notional amount of $190 million.
With the exception of Lehman's swap, all other swaps on Jefferson County's sewer warrants now have been terminated.
Bank of America on July 15 terminated its three swaps covering a notional amount of $753 million and calculated its termination payment at $31.1 million.
The county has estimated that its swap termination costs total $748 million. Those payments are subordinate to the debt service payments on the warrants, according to the county's material event notice.
Jefferson had 17 swaps covering the sewer debt since 2001, but some expired, terminated, were canceled, or were forward-starting in future years.
The county's negotiation team, which includes Alabama Gov. Bob Riley, has reached agreement with swap providers to concede swap termination payments if the county follows through with a plan to restructure the sewer warrants.
The plan requires that the Alabama Legislature allow the county to divert excess revenue from a local one-cent sales tax to the restructured sewer debt. Lawmakers have been in session since Feb. 3, but legislation helping Jefferson County has not been filed. The session ends May 14.