Bankrupt Alabama county too slow on workout plan: creditors

Reuters News
Posted: Jul 10, 2012 7:26 PM
Bankrupt Alabama county too slow on workout plan: creditors

By Michael Connor

(Reuters) - Alabama's Jefferson County is nowhere near developing workout proposals for ending its historic $4.23 billion bankruptcy and needs a hard-and-fast court deadline for hammering out an exit plan, a Wall Street creditor said on Tuesday.

If Jefferson County fails to meet a workout-plan deadline fixed by a federal judge, the biggest-ever U.S. Chapter 9 municipal bankruptcy could be dismissed, Assured Guaranty Municipal Corp said in a motion filed in Birmingham, Alabama.

"In the eight months since the county filed its Chapter 9 petition, the county has not taken any concrete steps toward filing a plan," Assured said. "The county has not even given a time frame for when it will begin to take ... necessary steps."

Assured, which insures some of the county's $3.2 billion of defaulted sewer-system warrants, said creditors such as JPMorgan Chase stood ready to negotiate and were being hurt by the delays.

Assured asked U.S. Bankruptcy Judge Thomas Bennett to order Jefferson County, whose finances have been savaged by the loss of a local jobs tax, political corruption, and soured sewer-system debt, to develop a plan by September 28.

In U.S. municipal bankruptcies, financially pressed cities, counties and other local governments have exclusive rights to propose repayment plans to creditors. Such plans often include debt forgiveness or longer payback terms and must be approved by the judge handling the case.

Jefferson County officials on Tuesday said they would oppose the request for a deadline and that work on possibly raising sewer-system customer rates and other moves toward a reorganization plan were underway.

"It is hard for us to move forward when we have to take our time on these lawsuits they keep filing," County Manager Tony Petelos said in an interview.

Last month the county lost a courtroom fight over the size of payments due to creditors from the sewer system's monthly revenues. Bennett ruled Jefferson County's officials had been improperly holding back about $54 million a year.

Jefferson County, the home of Birmingham, the state's business hub, filed for bankruptcy on November 9 after a tentative agreement with creditors unwound. That deal might have delivered a $1 billion reduction in the county's debts and possibly eased hundreds of government job cuts and reductions in public services.

(Reporting by Michael Connor in Miam. Additional reporting by Verna Gates in Birmingham; Editing by Philip Barbara)