Jefferson County, Ala., said that it may offer sewer-system creditors new bonds at “much lower” principal amounts if they fail to revise a bankruptcy exit plan that’s threatened by rising interest rates, Bloomberg News reported yesterday. Without concessions, creditors — including JPMorgan Chase & Co, hedge funds and bond insurers — won’t get cash for the $3 billion in debt they hold, according to Ken Klee, the county’s bankruptcy attorney. Instead, they would have to accept a debt exchange and have bankruptcy expenses paid out of sewer revenue, reducing the amount available for repayment, he said. On June 5, Jefferson County reached an agreement to pay its largest creditors $1.84 billion, or 60 percent of what they’re owed. Since then, interest rates on top-rated 30-year municipal bonds have jumped by 1.3 percentage points to 4.67 percent, according to data compiled by Bloomberg. At current rates, the county could refinance only $1.5 billion to $1.6 billion of sewer debt, Klee said.
