In a recent post we talked about the fact that Jefferson County has filed for bankruptcy after a tentative agreement with creditors fell through. A judge overseeing the case - which is the largest U.S. municipal bankruptcy ever-has delayed a decision to set a deadline for a workout plan.
U.S. Bankruptcy judge Thomas Bennet said that the $4.23 billion case is complicated and that he would schedule a status conference on the deadline request for sometime in mid-September. "I am struggling to understand the issues," he said. "It's going to require a substantial rewrite. I'm going to give you 30 to 45 days but no longer."
Assured Guaranty Municipal Corp has $709 million of exposure to defaulted Jefferson County sewer-system warrants and other debt and is requesting a fixed deadline of September 28. But Jefferson County has a right under Chapter 9 to work out an adjustment plan. Officials are arguing that other local governments involved in municipal bankruptcies in the past were given much more time to develop realistic plans of action.
The county's finances were hurt by $3.14 billion in sewer-system debt and the lost jobs tax. The tentative agreement with creditors would have reduced $1 billion in the county's debts and could have prevented hundreds of job cuts and public services reductions that were made. In addition to the bankruptcy filing, Jefferson County plans to seek help from Alabama's state legislature in hopes of restoring a local jobs tax that was declared unconstitutional in March.
Source: Reuters, "Judge postpones deadline decision for bankrupt Alabama county," Melinda Dickinson, August 9, 2012