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There's a legal challenge to the Jefferson County (Ala.) bankruptcy deal, and the county is set to go before the U.S. Court of Appeals for the Eleventh Circuit later this year, WBRC.com reported on Friday. The hearing is related to a lawsuit filed by sewer customers, who want to see the county's bankruptcy exit plan unraveled. On Thursday, the court said that it will consider the county's appeal of a district court ruling denying the county's motion to dismiss the lawsuit as moot. Jefferson County is expected to file briefs by June 1. Attorneys for the sewer customers will then likely file a response. The Eleventh Circuit could hear arguments for the case by the end of 2015.

Puerto Rico’s power utility disagrees with a proposal from bondholders to modernize the agency and fix its finances as a contract between the parties is set to expire at month-end, Bloomberg News reported on Friday. The bondholder plan to upgrade the utility’s infrastructure to lower fuel expenses would raise costs by about $3.1 billion over nine years, the agency said in an executive summary on Thursday. Lisa Donahue, chief restructuring officer for Prepa, has said that the investors’ plan may be premature in assuming full repayment of the agency’s $8.6 billion of municipal bonds and fails to meet environmental standards. “A successful restructuring of Prepa must be based on an executable plan that rightly balances the contribution of Prepa’s” creditors, customers and bond insurers, according to the executive summary. Prepa will release a restructuring plan this summer, Donahue told a commonwealth Senate committee last week.

Michigan Governor Rick Snyder yesterday signed into law a bill aimed at reducing interest rate costs for an upcoming Detroit bond sale, Reuters reported yesterday. Detroit privately placed $275 million of variable-rate bonds with Barclays Capital to finance its Dec. 10 exit from the biggest-ever municipal bankruptcy. As part of the city's bankruptcy court-approved plan, that debt is due to be sold in the U.S. municipal market in a fixed-rate mode by May 9. The deal will mark the city's first post-bankruptcy public bond sale.

The Chicago Board of Education is looking to weather unfavorable financial forecasts as it tries to borrow to pay for upgrades to the third-largest U.S. school system, according to a Bloomberg analysis today. Moody’s Investors Service and Fitch Ratings cut it to one step above junk last month, delaying a planned $372 million bond sale. Then last week, before a pared-down $296 million version of the deal, set for Tuesday, Governor Bruce Rauner said the system may need bankruptcy protection, an option that’s not legally open to it. The system faces a projected $1.1 billion budget gap next fiscal year as retirement costs climb. Its relative borrowing costs are at a two-year high, and with negative outlooks from Moody’s and Fitch, a downgrade to junk may chase off investors. The fiscal strains are an amplified version of the city’s struggle to stave off insolvency. Chicago, with $20 billion of unfunded pension liabilities, has the lowest general-obligation grade among the 90 most-populous cities, apart from Detroit.

An emergency manager tapped by New Jersey Gov. Chris Christie to study Atlantic City’s deteriorating finances is preparing to interview restructuring lawyers, marking the latest step by authorities to tackle the city’s woes, the Wall Street Journal reported today. Atlantic City faces a budget gap of more than $100 million this year, and casino revenues continue to decline. Four properties have closed since the beginning of 2014. The emergency managers, Kevin Lavin and Kevyn Orr, have already proposed hundreds of layoffs to the city’s workforce, cuts to the public school system and changes in some employee contracts. They have also recommended that the state provide the city with continued financial aid.

Puerto Rico's troubled utility, PREPA, made another withdrawal from its reserve account to make a quarterly bond payment on April 1, according to a regulatory filing posted by the utility, Reuters reported yesterday. While the withdrawal amounted to just $8.8 million, the filing posted on Wednesday shows that the utility is remaining current on it debt payments ahead of a much larger bond payment of around $400 million which comes due on July 1 and that some analysts expect PREPA to miss. The bulk of PREPA's more than $8 billion in outstanding debt has biannual bond payments. Three series of revenue bonds have quarterly due dates. They include a floating rate bond and taxable Build America Bonds.

Chicago Mayor Rahm Emanuel yesterday threw cold water on Gov. Bruce Rauner's suggestion that Chicago Public Schools (CPS) should consider declaring bankruptcy to get its financial house in order, instead returning to the argument that the state should provide relief for the cash-strapped district, the Chicago Tribune reported today. "The idea that you would go to bankruptcy and yet you would leave in place a tax code that has dual taxation on Chicago citizens is wrong," Emanuel said when asked about Rauner's talk about CPS going bankrupt. "Nothing is worse economics and a worse strategy than leaving in place dual taxation on Chicago residents that are the only residents in the state that have to pay twice, and only get the benefit of one teacher." Emanuel brought up the dual taxation argument frequently during the recent mayoral campaign, but it's one that seems unlikely to gain much traction in Springfield. Chicagoans pay for CPS pensions through property taxes and also pay state income tax. The state pays for suburban and Downstate teacher pensions. But critics note that CPS gets a bigger share of state school funding.

Puerto Rico’s junk-rated electric utility gained 15 more days to negotiate with creditors as it struggles to repair its finances, Bloomberg News reported yesterday. The Electric Power Authority, called Prepa, said Wednesday that creditors agreed to extend to April 30 an accord that pushes off default. It’s the second time that creditors consented to continue the contract, which was set to expire yesterday. The agreement keeps lenders from moving to collect on debt and gives the agency more time to create a plan. The utility, bondholders, insurance companies and banks first entered into agreements in August after Prepa used reserves to pay investors. “The creditors’ agreement to our forbearance proposal demonstrates that we are making progress and there is merit to continuing conversations to find feasible solutions that will transform Prepa,” said Lisa Donahue, Prepa’s chief restructuring officer.

The Treasury Department is quietly stepping up its involvement in Puerto Rico, an indication that the island’s financial problems, which have been simmering for years, are reaching a critical point, the New York Times reported today. High-ranking officials have been shuttling between Washington, D.C., and Puerto Rico, advising commonwealth officials as they try to stabilize the island’s finances. Puerto Rico is struggling with far more debt than analysts believe it can repay, and no legal framework exists to reduce the burden. Financially troubled cities and counties in the U.S. can take shelter in chapter 9 bankruptcy, but federal law denies that option to United States territories and commonwealths, and attempts to amend the law face an uphill battle. Neither a federal bailout nor a takeover of the island’s finances by the Treasury is under discussion, according to officials. On a per-capita basis, Puerto Rico’s debt load of $73 billion is bigger than that of any state. Much of it is owned by middle-class Americans who bought the island’s municipal bonds indirectly, as part of their retirement accounts, so any default would reverberate far beyond Puerto Rico’s shores. But to avoid a default in the near term, Puerto Rico has little choice but to add to the mountain of debt and is seeking to borrow as much as $2.9 billion more this spring.

Counterparty Wells Fargo has so far refused to lower the rating threshold for three Chicago swaps that reached termination events through recent downgrades, Bond Buyer reported yesterday. Though it hasn't changed the threshold, Wells Fargo has not demanded, by designating an early termination date, that the city make an estimated payment of $38 million based on a recent negative mark-to-market valuation. The bank is now allowed to do so under the automatic termination event triggered by the city's recent downgrade from Moody's Investors Service but is giving the city time to resolve its swaps dilemma even as it's refused to lower the rating threshold as requested.