Creditors Back Alabama County's Bankruptcy Plan

Tuesday, 08 Oct 2013 01:43 PM

 

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Creditors in the $4.2 billion municipal bankruptcy case involving Alabama's Jefferson County have "overwhelmingly approved" the county's plan of adjustment, Jefferson County Commission President David Carrington said.

Creditors had until an Oct. 7 deadline to submit their votes on a bankruptcy exit plan approved in August by the judge in the case. Carrington said the final count will come later this week.

Approval by creditors paves the way for a year-end bond sale of about $1.9 billion that is needed to pay off current sewer debt bondholders at sizable discounts.

Jefferson County had sought protection from creditors in November 2011, stung by overwhelming sewer debt and diminished revenue.

Jefferson County was the largest municipal bankruptcy case in U.S. history until the city of Detroit in July sought protection from creditors under Chapter 9 of the U.S. bankruptcy code with a debt load exceeding $18 billion. That case is ongoing.

The outcome of the Jefferson County creditor vote was to some degree a formality because a majority of creditors had previously agreed to the negotiated plan, which promises to deliver only $1.835 billion to sewer-system warrant holders owed $3.078 billion, with bondholder losses on a scale not seen since the 1930s.

The county has also struck deals covering defaulted school warrants and other non-sewer debt.

© 2014 Thomson/Reuters. All rights reserved.

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