March 29 (Bloomberg) -- Jefferson County, Alabama, will use bond reserves for a $6.38 million payment due April 1 on lease warrants for the Jefferson County Public Building Authority, said attorney Kenneth Klee, who represents the county in its bankruptcy case.
Bondholders will be paid out of the bond reserve fund, putting the warrants into default, Klee said. The county said yesterday that it would miss a $15 million general-obligation bond payment April 2.
Klee spoke in an interview in a suburb of Birmingham after giving a lecture at a local university, and then answered follow-up questions via e-mail.
Jefferson County filed for bankruptcy in November after the county, state officials, a court-appointed receiver and bondholders failed to implement a deal that would have cut about $1 billion from $3 billion of county debt tied to the failed financing of a sewer renovation. The county also has about $200 million of general-obligation bond debt and $814 million of school-construction bonds.
The financial crisis in the county, the state’s most populous, was caused by years of corruption and bond deals gone bad. Jefferson has fired workers, closed satellite courthouses and has been unable to pick up road kill on a timely basis.
The $86 million in building-authority warrants were issued in 2006 to pay for a courthouse and jail expansion in Bessemer, Alabama, according to bond documents. Because of the county’s financial crisis, the jail never opened.
County officials said yesterday that inaction by the Alabama Legislature prevented it from paying its debts.
The county requires a change in state law to raise more revenue, after a court struck down a tax on wages last year.
On March 16, $25,000 of the lease bonds maturing in 2021 traded for 71.7 cents on the dollar to yield 9.95 percent, according to data compiled by Bloomberg.
The bonds were insured by Ambac Assurance Corp., a unit of Ambac Financial Group Inc.
To contact the reporter on this story: Margaret Newkirk in Atlanta at firstname.lastname@example.org
To contact the editor responsible for this story: Mark Tannenbaum at email@example.com