Jefferson County,
Alabama, commissioners voted 4-1 to file the largest U.S. municipal bankruptcy after reaching an impasse over concessions with holders of $3.14 billion of bonds.
JPMorgan Chase & Co. (JPM), which arranged most of the debt to fund a sewer renovation, will likely take the biggest loss.
A provisional agreement with creditors that commissioners approved in September included $1.1 billion in concessions and called for sewer-rate increases of as much as 8.2 percent for the first three years. The county was unable to get signed commitments from creditors, Commission PresidentDavid Carrington said today. Terms were changing even last night, he said.
In addition, the county’s 25-member legislative delegation was unable to unite behind bills needed to implement the tentative settlement, including ways to generate revenue for a strained general fund.
The vote by officials in Alabama’s most populous county occurred about a month after
Pennsylvania’s capital of Harrisburg sought court protection citing millions in overdue bond payments tied to a trash-to-energy incinerator. A Jefferson filing would eclipse that of
California’s Orange County in 1994. The action might reignite concerns among investors over defaults in the $2.9 trillion U.S. municipal bond market.
