BRADENTON, Fla. - Standard & Poor’s late Tuesday lowered its underlying rating on Jefferson County, Ala.’s Series 2003B-2 through 2003B-7 sewer revenue refunding warrants to D from CCC due to failure of the county to make a principal payment on the warrants on April 1 in accordance with the terms of the standby warrant purchase agreements, which are under an accelerated amortization schedule because of bond insurer downgrades.
The county entered into forebearance agreements deferring until April 15 the first principal payment of $53 million owed under the sewer system’s standby bond purchase agreements,. The forebearance agreements allowed Jefferson County on April 1 to make only an interest payment, which was approximately $4.2 million.
“Although the county and the relevant banks entered into a forbearance agreement that effectively delayed payment under the standby warrant purchase agreements for two weeks, Standard & Poor’s rates an issue D when payments on an obligation are not made on the date due in accordance with the terms of the documents,” Standard & Poor’s analyst Sussan Corson said in a statement.
The underlying rating on Series 2003B-1-A through 2003B-1-E and Series 2003C-1 through 2003C-10 auction-rate sewer system revenue bonds continue to be rated CCC since the county has continued to make principal and interest payments on these obligations to date, Corson said. The ratings remain on CreditWatch with developing implications.
Insurer downgrades have led to failed remarketings of the county’s $847 million of variable-rate demand sewer debt and failed auctions on some of its $2.2 billion of auction-rate securities resulting in significantly higher interest rates and defaults on swap. The county is negotiating with banks, liquidity providers, and swap counterparties on ways to resolve the financial crisis.