Home to the city of Birmingham, Jefferson County, Ala., earned the dubious distinction of being the biggest U.S. municipal borrower to go bankrupt when it entered court protection in 2011. Now, armed with an investment-grade credit rating, it’s selling $2.3 billion of bonds to refinance the debt that helped get the county out of bankruptcy, Bloomberg News reported. The sale represents the latest chapter in the county’s turnaround, and will test investor demand with what is poised to be one of the biggest deals of the year in the $4 trillion U.S. state and local debt market. “We expect this will be one of the larger tax-exempt issues sold in 2024, and a rather unique investment opportunity,” said Mike Dunn, managing director of public finance at Stifel Financial Corp., the joint senior bookrunning manager, in an email. Jefferson County, with a current population of about 665,000, was pushed into bankruptcy by the chaos of the Great Financial Crisis. After running up debt to rebuild its sewer system, the county sought to hold down costs — and rate hikes on consumers — by refinancing into floating rate-debt overlaid with derivatives that were supposed to guard against the risk of rising interest rates. But the strategy backfired during the crisis, hitting it with surging debt bills it couldn’t afford to pay. The county sold new bonds in 2013 as part of its restructuring and the sewer system’s finances have turned around since then, bond documents noted. The county hiked sewer rates about 76% from fiscal 2013 to fiscal 2022, and continues to impose annual rate increases.
