Alabama county wants $1.3 billion debt reduction: report

Reuters News
Posted: Jul 18, 2011 4:08 PM
Alabama county wants $1.3 billion debt reduction: report

ATLANTA (Reuters) - Alabama's Jefferson County wants creditors to wipe $1.3 billion from its bond debt as part of a settlement plan, a local newspaper said in a report that a senior county official said on Monday was broadly accurate.

Settlement talks this month with creditors, including JPMorgan Chase, are part of a bid to resolve a county financial crisis over a $3.2 billion sewer debt and avert what would be the largest municipal bankruptcy in U.S. history.

The Birmingham News reported on Sunday that the county also wanted creditors to accept single-digit annual rate increases for sewer system customers and to create a relief fund for struggling ratepayers.

One of the county's five commissioners said on Monday the story was broadly accurate.

"The numbers are pretty close," said County Commissioner Joe Knight. Other commissioners declined to comment.

Previously, commissioners have said they will not disclose details of their position while negotiations with creditors are ongoing, particularly during a 30-day "standstill" period for talks that is due to end July 29.

"It (a possible deal) is still much of a moving target. Of course we haven't heard back from the creditors. There are still a lot of stars to line up to get this deal done," Knight told Reuters.

"In order for a final resolution, the general fund and education warrants will have to be addressed as well," he said.

Under the plan, the county would have to borrow $2.135 billion to refinance the sewer debt, with $1.86 billion available to pay the existing debt and $213 million for a debt service reserve fund, the newspaper said.

The county, which includes the state's biggest city, Birmingham, would also have to create a separate public corporation to operate the sewer system and issue the refinancing debt.

It would also have to suspend or settle outstanding litigation, the newspaper said.

(Reporting by Matthew Bigg and Melinda Dickinson in Birmingham, editing by Dan Grebler)