Alabama’s Jefferson County Files Largest Municipal Bankruptcy in U.S. History
After reaching an impasse over concessions with holders of $3.14 billion in bonds, Commissioners in Jefferson County, Alabama, voted 4-1 to file the largest municipal bankruptcy action in U.S. history.
According to Bloomberg, JPMorgan Chase & Co., which arranged most of the outstanding debt to fund a sewer renovation, will likely take the largest loss.
A provisional agreement with creditors approved by Commissioners in September 2011, included $1.1 billion in concessions and called for sewer rate increases of as much as 8.2% over three years. The agreement was abandoned when the county was unable to obtain commitments from creditors.
The vote by officials in Alabama’s most populous county occurred nearly a month after Pennsylvania’s capital of Harrisburg sought court protection citing millions in overdue bond payments tied to a trash-to-energy incinerator. The Jefferson bankruptcy filing dwarfs California’s Orange County bankruptcy in 1994. Market observers fear that the action might reignite investor concerns regarding defaults in the $2.9 trillion U.S. municipal bond market.
