Jefferson County officials said they agreed on new terms with their Wall Street creditors to end the county's municipal bankruptcy. Although the revised terms were not disclosed, officials of the Alabama county revealed that they needed an additional USD 350 million in concessions since interest rates had increased in five months. The county and its creditors which included JPMorgan and hedge funds arrived at a tentative settlement to put an end to the USD 4.2 billion bankruptcy in June.
The largest county in Alabama filed for bankruptcy under Chapter 9 in 2011 primarily because of its overwhelming sewer debt. Jefferson's more than USD 4 billion bankruptcy filing was the largest in the US history of municipal bankruptcies when it was filed. However, this was superseded by Detroit's filing this year due to its long-term debt which reached USD 18 billion.
County officials said, "The Jefferson County Commission will consider a modified financing plan that incorporates the agreements in principle we have reached with representatives of all of the major sewer creditor groups: JP Morgan, the bond insurers, the hedge funds and the liquidity banks."
The terms of the June agreement reached by Jefferson County and its creditors hinged on a planned sale of new bonds worth USD 1.9 billion to replace the sewer system bonds which had an estimated face value of USD 3.1 billion. In October, however, county officials said rising interest rates had reduced the amount of new bounds that Jefferson could issue which endangered the agreement. County officials then asked the creditors to make more concessions. The June agreement will have to be approved by a federal judge.
Moody's Investors Service analysts said the June agreement meant losses for sewer system creditors amounting to 40 centes on the dollar. The analysts added that the new concessions would increase those losses by 10 cents more.
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