Alabama County Buys More Time to Avert Bankruptcy

With the urging of the states governor, Alabamas insolvent Jefferson County on Thursday postponed for another week a long-awaited decision of whether to file for Chapter 9 bankruptcy, potentially setting the stage for an eleventh-hour negotiated settlement to avert the countrys largest-ever municipal bankruptcy.

The move came as creditors provided state and county officials a revised settlement offer shortly before a special meeting of the commission, during which members were to vote on whether to move ahead with a Chapter 9 filing.

Commissioners told FOX Business the revised offer is short of whats needed to keep the countys head above water, but the delay buys the two parties additional time for further negotiation.

This offer is not & acceptable to me, Commissioner Jimmie Stephens told FOX Business.  But it is a viable and real offer that we are considering and taking very seriously.

Citing confidentiality, commissioners said they could not reveal terms of the latest offer.  But Stephens considers it progress and said an agreeable deal is within striking distance.

Saddled with more than $3 billion of debt from a federally-required sewer system upgrade in the 1990s, the county finds itself unable to pay back the bonds.

However, part of the stress comes from a bond refinancing in 2003 that caused the countys interest rates to spike -- a process later revealed as corruption-ridden, and which led to the bribery conviction of a county commissioner who helped arrange the deal with JPMorgan. Additionally, more than a dozen other county officials and contractors have been accused or convicted of wrongdoing in the sewer project.

Commissioners complain that Jefferson County has been burdened with this insurmountable debt for years, leaving a bankruptcy filing as the last, and possibly best alternative, short of a last-minute generous change of bond terms.

Therefore, they keep the bankruptcy option on the table.

Everything weve been trying to do to avoid bankruptcy has failed, Commissioner Sandra Little Brown told FOX Business in an interview.  So now, we have to get an agreement or we go bankrupt.

Commissioner T. Joe Knight concurred, adding, We are not just posturing.  We are ready, and we have the resolve (to file Chapter 9) if thats what it takes.

The county has already hired legal counsel to assist in the Chapter 9 process.  If no agreement is reached by next Thursday, attorneys will file in the United States Bankruptcy Court for the Northern District of Alabama, in Decatur.

In doing so, Jefferson County will surpass Orange County, Calif., as the countys most expensive municipal bankruptcy in history.

Commissioners and state officials are hoping a negotiated settlement can happen in the days ahead to avoid such an outcome.

Still, the threat of a bankruptcy, the hiring of counsel, and a scheduled vote to authorize a bankruptcy filing puts serious pressure on banks such as JPMorgan Chase and Bank of America, two of the major bond holders.

Were ready for a negotiated settlement.  Or were ready to file bankruptcy, Commissioner Brown said.  One or the other.

Unlike the debt crisis in Washington, Jefferson County is not struggling with primarily a political fight.  Instead, its problems are mathematical.

Similar to Washington,  leaders face a deadline.  Two days after the Treasury says the federal government will be unable to pay all its bills, county officials will again be confronted with whether to pursue the route of bankruptcy, an option they say they want to avoid.

Your deal is never finalized until you put the ink on it, Commissioner Knight said.  Its continuing to be negotiated & Theres always hope.