BRADENTON, Fla. — Syncora Guarantee Inc. on Thursday joined a dozen creditors seeking to appeal various rulings by the federal judge in Alabama overseeing Jefferson County’s bankruptcy case.
Syncora and other insurers are exposed to portions of the county’s $4.2 billion of outstanding debt, including $3.14 billion of defaulted sewer warrants that prompted the county to file the country’s largest Chapter 9 in November.
Assured Guaranty Municipal Corp. and Financial Guaranty Insurance Co. are among a dozen creditors that filed notice of appeal in January.
Creditors want to appeal a number of rulings by Judge Thomas Bennett, including his removal of the state court-appointed receiver overseeing the sewer system. The Jan. 6 decision returned control of the system, and its finances, to the county.
The appeals have been prompted, in part, by Jefferson County’s plan to reduce the amount that had been set aside under the receiver for debt service payments.
Bennett has given creditors until Feb. 17 to file statements supporting their appeals. In court filings, Syncora said it insured $839.5 million of Series 2002C and $300 million of 2003B sewer revenue refunding warrants, and provided a debt service reserve surety for the bonds.
Insurers of the county’s sewer warrants entered a financial guaranty agreement that requires the county to reimburse and indemnify them for payments and losses. In return, they have a security-in-interest in the sewer system revenues. Because of draws on insurance policies, Syncora said that it now owns $184 million of sewer warrants.
Jefferson County filed for bankruptcy after several months of intense negotiations with creditors last fall, which failed to result in a restructuring plan for the sewer warrants. Most of the debt is outstanding in auction- and variable-rate mode.
The same day the petition was filed, the county demanded return of the sewer system from the receiver.
“Syncora submits that the county’s real motive in filing this Chapter 9 petition was to collaterally attack the receiver’s authority, retarding all progress made by creditors to date, and not in furtherance of a good faith desire to effect a plan to adjust debts,” Syncora said in court documents.
Though Bennett ordered the sewer system returned to the county, he said he could reappoint the receiver if the county fails to operate the system properly.
The receiver, John Young, is among those appealing Bennett’s ruling. Young, now off the county’s payroll, has taken down a website containing detailed public information about the receivership.
Others seeking to appeal Bennett’s rulings are Bank of New York Mellon — the trustee for the sewer warrants — JPMorgan, Bank of America NA, and a consortium of six liquidity banks: the Bank of Nova Scotia, Societe Generale, Regions Bank, BNY Mellon, State Street Bank and Trust Co., and Lloyds TSB Bank.
Meanwhile, Jefferson County failed to release its 2011 audit on Tuesday. q
The county late last year promised to have the audit complete by the deadline as part of negotiations to restructure its defaulted sewer warrants.
Since an agreement was never reached, it is not clear when the county intends to complete the audit.