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Jefferson County Won’t Take Deal That Rules Out Bankruptcy

Jefferson County, Alabama, won’t agree to a deal for restructuring its debt that rules out the possibility of filing for bankruptcy protection, Commission President David Carrington said.

Carrington, who is traveling to New York this week to speak with creditors in a failed $3.14 billion sewer bond refinancing, wants the option open because the county hasn’t shored up its general fund after a court struck down a wage tax.

“If a condition is we agree to not file Chapter 9, that’s a nonstarter,” Carrington told reporters today in his Birmingham office.

Jefferson County, home to Birmingham and more than 658,000 residents, has been in fiscal straits since a sewer-bond refinancing collapsed more than three years ago during the credit crisis. The refinancing involved what court-appointed receiver John Young described in a report as a borrowing binge to pay for improvements ordered by the federal government.

The county rejected an offer Aug. 12 that would have reduced debt to $2.33 billion and required Alabama Governor Robert Bentley to give his permission before the county could file for bankruptcy. It has until Sept. 16 to negotiate another offer. The county has proposed debt be reduced by another $140 million, Carrington said.

A deal would likely need the approval of Alabama’s Legislature. Under the creditors’ proposed agreement, the debt would come with a “moral obligation” backing from the state, requiring lawmakers approval and estimated to be worth more than $1 billion in reduced interest rates.

Carrington will travel to New York with Commissioner Jimmie Stephens, chairman of the Finance Committee, to speak with creditors from Aug. 23 to at least Aug. 25. He said the number of meetings was planned was “fluid” and that he would speak with “a handful” of creditors. He declined to provide further details.

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