Jefferson County, Alabama, commissioners said they may cancel a $1.84 billion debt-reduction settlement tied to the county’s bankruptcy-exit plan unless creditors offer about $350 million in new concessions.
The county’s attorneys have said since August that the settlement can’t go forward unless creditors renegotiate the deal or interest rates drop. At a hearing today, Commissioner David Carrington said the county needs $350 million worth of concessions to make its bankruptcy-exit plan work.
“I don’t care where we get the $350 million, but it has to be next week or the week after,” Carrington told reporters after the commission meeting today in Birmingham.
Under the notice county officials adopted today, parties to the settlement, including the county, must wait 15 days before they are free to back out of the deal. The settlement was signed earlier this year by JPMorgan Chase & Co., a group of hedge funds and bond insurers.
To end its almost two-year stint in bankruptcy, the county reached a deal in June with creditors that hold the majority of about $3 billion in outstanding sewer-system debt. Under that proposal, creditors would split about $1.84 billion in cash instead of pressing for full repayment.
U.S. Bankruptcy Judge Thomas Bennett is scheduled to consider approving the bankruptcy-exit plan next month at a hearing in Birmingham.
Without a new deal, the county’s bankruptcy attorneys say that court hearing won’t take place. Carrington said the county would consider forcing creditors to accept less than they have been offered under the settlement using the so-called cramdown rules of the bankruptcy code.
The case is In re Jefferson County, 11-bk-05736, U.S. Bankruptcy Court, Northern District of Alabama (Birmingham).
-- Editors: Fred Strasser, Stephen Farr