BRADENTON, Fla. — Alabama federal Judge Thomas Bennett Friday limited the power of the receiver managing Jefferson County's sewer system.

Bennett also held that the special revenue pledge that the county made when it issued $3.2 billion of sewer warrants remains in force, and said that debt-service payments will continue to be made while the bankruptcy case proceeds. He will determine the amount available for debt payments — after operating expenses — in a future ruling, he said.

The revenue-pledge ruling appears to dispel concerns in the bond market that Jefferson County's case could have overturned a long-held legal precedent that debt secured by a specific pledge of revenues continues to be paid during a Chapter 9 proceeding.

The decision to limit receiver John Young's jurisdiction was seen as a victory for the county. Judge Bennett denied motions to exempt the receiver from the automatic stay that accompanied the county's bankruptcy filing in early November.

The stay freezes lawsuits and actions by creditors and anyone acting on the county's behalf.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.