Jefferson County, Ala., filed a plan to end the biggest U.S. municipal bankruptcy later this year by imposing more than $1 billion in principal reduction on investors who hold defaulted sewer-related debt, Bloomberg News reported yesterday. Only a small percentage of the county’s $4.2 billion in debt will be paid in full, marking the first time U.S. investors holding municipal debt have been forced to take losses on the principal owed to them as part of a bankruptcy case. The plan is based on a settlement announced earlier this month among JPMorgan Chase & Co., seven hedge funds and a group of bond insurers, which together hold about $2.4 billion of the debt. The group will split about $1.84 billion, with JPMorgan taking the steepest cuts, collecting $375 million of the $1.22 billion it is owed, according to the plan.
