The creditors' trustee in Alabama's municipal bankruptcy asked the U.S. bankruptcy court to allow an accelerated payment on Jefferson County's debt, Reuters reported yesterday. The Bank of New York Mellon Corp., which collects the money from the county, last week said that some payments due on Feb. 1 to owners of $3.14 billion of sewer debt were suspended. In its court filing yesterday, the bank said that some bondholders did not agree to the trustee's application of funds to the regularly scheduled payments, so that the trustee did not have enough money to pay the principal. Lawyers for creditors and Jefferson County, which filed for chapter 9 bankruptcy in 2011 mainly because of overwhelming debt on its sewer system, are battling in court over sewer fee hikes that would be used in part to service the sewer warrants.
For more on municipal financial distress and chapter 9 trends, be sure to pick up a copy of Municipalities in Peril: The ABI Guide to Chapter 9, Second Edition.