Bankrupt Alabama county sees exit plan in June: lawyer

Reuters News
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Posted: May 09, 2013 11:41 AM
Bankrupt Alabama county sees exit plan in June: lawyer

BIRMINGHAM, Alabama (Reuters) - Alabama's Jefferson County is close to an agreement with some creditors and expects to file a plan by late June to exit its $4.2 billion municipal bankruptcy, a lawyer for the county said on Thursday.

The case is seen as a testing ground for how bondholders fare when a local issuer becomes insolvent under excessive financial pressure. Jefferson County appears likely to become the first big U.S. local government to impose losses on bondholders since 1930s.

"We are looking at a largely consensual plan by late June, a hearing in August, voting 30 days after approval, confirmation in October or November, (and to be) put in effect by no later than late December," attorney Kenneth Klee told a U.S. bankruptcy judge in Birmingham.

"I believe we have made substantial progress toward a consensual agreement," Klee said.

A creditors' lawyer, David Lemke representing Bank of New York Mellon, said in court that he was pleased to hear of the progress in negotiations between the county and some creditors but said his client was not part of the bargaining.

Klee gave no details of terms that may be part of the county's plan of adjustment, though the head of the county's commission has repeatedly said he expects savings of about $1 billion and some investors expect bondholders to take losses.

Jefferson County, which filed for bankruptcy in 2011, is the largest local government in the country ever to do so, mainly because of debts taken on for a costly overhaul of the county's sewer system.

Klee said the county may as early as next week approve an agreement with owners of some debt but that the talks over $3.2 billion of sewer debt were "very complex" and include JPMorgan Chase, hedge funds and mono line insurers.

"We are extremely close with JPMorgan in resolving all our differences. We are extremely close with the hedge funds in resolving all our differences. We are extremely close with the mono line insurers in resolving all our differences," Klee said.

(Reporting By Melinda Dickinson in Birmingham and Michael Connor in Miami; Editing by Alden Bentley)