Reuters: Bankruptcy News: Judge postpones deadline decision for bankrupt Alabama county

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Judge postpones deadline decision for bankrupt Alabama county Aug 8th 2012, 20:20 By Melinda Dickinson BIRMINGHAM, Ala. | Wed Aug 8, 2012 4:20pm EDT BIRMINGHAM, Ala. Aug 8 (Reuters) - The judge overseeing the landmark bankruptcy of Alabama's Jefferson County o n W ednesday delayed by at least a month a decision to set a deadline for a workout plan demanded by a creditor. Saying the $4.23 billion case, the largest U.S. municipal bankruptcy ever, was immensely complicated, U.S. Bankruptcy Judge Thomas Bennett told lawyers in a hearing he would schedule a status conference on the deadline request by Assured Guaranty Municipal Corp for an unspecified day in mid-September. Bond-insurer Assured, which has $709 million of exposure to defaulted Jefferson County sewer-system warrants and other debt, argues that cash-strapped Jefferson County has been slow in developing a so-called plan of adjustment to exit Chapter 9 and needed a fixed deadline of Sept. 28. The county, along with unsecured creditors, argued that a quick exit plan is impossible because significant financial issues, such as possible rate hikes for the sewer system at the heart of other bankruptcy, remain outstanding. Jefferson County also intends to seek help from Alabama's state legislature, which has sole authority to restore a local jobs tax that was declared unconstitutional in March 2011 and was a driver of the county's Chapter 9 filing on Nov. 9. "In fairness, it is not something I am not inclined to grant at this time," Bennett said of the Sept. 28 deadline. "It is too soon, and there are too many issues." If Jefferson County, its finances ravaged by $3.14 billion of soured sewer-system debt as well as the lost jobs tax, fails to produce an adjustment plan by a deadline set by Bennett, the bankruptcy case could be thrown out, lawyers said. Usually, bankruptcy cases can drag on for years. Unsecured creditors Wells Fargo and National Public Finance Guarantee Corp, which insures county general obligation debt, also filed briefs saying Assured's proposed deadline would hobble their efforts to secure payments. Jefferson County, which has the sole right under Chapter 9 law to hammer out an adjustment plan, has also said other local governments in municipal bankruptcies had much longer periods to develop plans. Jefferson County's workout plan, which must be judged fair to creditors and reasonable in light of its finances and obligations, must be approved by Bennett and can include reductions in bonds and other debt. Home of Birmingham, Alabama's business hub, Jefferson County filed for bankruptcy after a tentative agreement with creditors unwound. That deal might have delivered a $1 billion reduction in the county's debts and possibly eased hundreds of government job cuts and reductions in public services. In a separate matter, Bennett gave investment banker and local activist Calvin Grigsby and others seeking to create a class claim in the case on behalf of 130,000 sewer system customers additional weeks to replead their written filings. Grigsby claims the rate payers were hurt by corrupt politicians and financiers, including former county commissioners. "I am struggling to understand the issues," Bennett told Grigbsy. "It's going to require a substantial rewrite. I'm going to give you 30 to 45 days but no longer." Link this Share this Digg this Email Reprints

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