Wall Street creditors yesterday asked a U.S. judge overseeing America's biggest municipal bankruptcy to knock down a legal hurdle preventing them from pushing Alabama's Jefferson County to charge higher rates to service their sewers, a move that would help the county pay down more than $3.14 billion of defaulted debt, Reuters reported. In testimony coming a day after county officials returned from private talks with some creditors in New York, lawyers representing banks, insurers and hedge funds questioned Jefferson County Manager Tony Petelos about procedures used by county officials to set sewer rate increases in November. Those increases, totaling about 5.9 percent, were too low to pay interest and principal on the sewer debt, according to the creditors seeking an exemption to an automatic stay that bars lawsuits during a federal chapter 9 bankruptcy case. JPMorgan Chase, Bank of New York Mellon and other creditors want hikes of 22 percent or more and have requested that Bankruptcy Judge Thomas Bennett permit them to pursue a lawsuit on the rates in Alabama state court. County officials have said in legal papers that the November hike would raise system revenue by $8.5 million a year and could be followed by other increases as part of a settlement with creditors.
