Jefferson County Judge Strikes Reference to ‘Statutory Lien’
The judge overseeing the bankruptcy of Jefferson County, Alabama, said he didn’t intend to protect its defaulted sewer bonds with a “statutory lien” in his ruling regarding the county’s insolvent sewer system.
U.S. Bankruptcy Judge Thomas B. Bennett in Birmingham said in a court hearing today that a footnote saying the sewer debt was “secured by a statutory lien,” was a word-processing error that he will fix.
“I probably should have taken it out,” Bennett said. “I left it there as a placeholder so I didn’t have to move all the numbers about. It is not intended to address the issue that you were concerned about.”
Bennett was responding to a request by Jefferson County to clarify the footnote. The county argued that granting bondholders a statutory lien could affect the bankruptcy case and any appeal filed by creditors.
In bankruptcy different types of liens grant creditors distinct levels of protection.
County officials and the trustee for bondholders are in talks about how much of the sewer system’s revenue must be turned over to bondholders. The system doesn’t generate enough money to cover the sewer warrants, according to court records.
Not Impeding Talks
David Lemke, an attorney for the bondholders’ trustee, Bank of New York Mellon Corp., said the footnote was not impeding talks about the sewer revenue.
Jefferson County filed for bankruptcy in November, more than a year after a state court gave control of the sewer system to John S. Young Jr., a receiver representing bondholders who own the sewer warrants.
Bennett ruled that the county’s bankruptcy ended Young’s power over the system. The county is now in the process of resuming control.
The bankruptcy was filed after the county, state officials, the receiver and bondholders failed to implement an agreement to cut the sewer debt by about $1 billion, raise rates and win financial support from the Alabama Legislature.
The case is In re Jefferson County, 11-05736-9, U.S. Bankruptcy Court, Northern District of Alabama (Birmingham).
To contact the reporter on this story: Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net.
To contact the editors responsible for this story: John Pickering at jpickering@bloomberg.net.
Rate this Page