Bankrupt Alabama county says in pact with key creditors

Reuters News
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Posted: Jun 04, 2013 4:22 PM
Bankrupt Alabama county says in pact with key creditors

By Melinda Dickinson

BIRMINGHAM, Alabama (Reuters) - JPMorgan Chase & Co, several hedge funds and bond insurers holding 78 percent of sewer debt from Alabama's bankrupt Jefferson County have signed off on a deal aimed at ending the largest U.S. municipal bankruptcy, a lawyer for the county said on Tuesday.

JPMorgan, one of the biggest holders of the county's $3.14 billion of sewer debt, agreed to give up about $842 million of the $1.218 billion of sewer debt it holds, according to a county document.

A spokesperson for JPMorgan declined to comment.

Bond insurers Financial Guaranty Insurance Co (FGIC), Assured Guaranty Ltd and a unit of Syncora Holdings Ltd have signed "plan support agreements," as have seven hedge funds, the county said.

Together, these creditors hold about $2.4 billion of Jefferson County sewer warrants that were a key driver in the county's landmark bankruptcy filing in November 2011.

A spokeswoman for Assured had no immediate comment, and representatives for FGIC and Syncora could not immediately be reached for comment.

As part of the agreements, the county will raise sewer rates by 7.41 percent a year over four years and the creditors will receive $1.835 billion. The county will also refinance the sewer debt.

The county, which has struck smaller agreements with other non-sewer creditors, is readying a plan of adjustment that must be approved by a federal bankruptcy judge before the local government can leave bankruptcy protection.

(Reporting By Michael Connor in Miami; Editing by Dan Burns and Carol Bishopric)