Alabama's Jefferson County will brief a bankruptcy judge tomorrow on its progress toward exiting from bankruptcy, as the county appears likely to become the first big U.S. local government to impose losses on bondholders since the 1930s, Reuters reported yesterday. The case is seen as a testing ground for how bondholders fare when a local issuer breaks under excessive financial pressure. Jefferson County's $4.2 billion bankruptcy filing is the largest such municipal case in history, the result of debts taken on in a costly overhaul of the county's sewer system. Bankruptcy Judge Thomas Bennett is likely to set a schedule tomorrow for the county to file a workout plan with creditors. For some investors, this week's hearing may deliver clues as to which bondholders will take the worst loss. About $3.2 billion of the county's obligations are composed of the sewer and water bonds, which are expected to take the biggest haircut.
