Dopo i bond spazzatura, ora tocca ai bond fognatura

[Gaudente]

La contea di Jefferson in Alabama non riesce piu' a pagare i bond emessi per l'ammodernamento delle fognature. Si rischia un default di 4,6 miliardi.



http://www.bloomberg.com/apps/news?p...=aaFNHznw79J8#



Jefferson County, Banks Discuss Payment for Extension (Update1)

By Martin Z. Braun

May 28 (Bloomberg) -- Jefferson County, Alabama, facing a 48-hour deadline to make a debt payment to eight banks, is considering a bank proposal to extend it 60 days for a roughly $25 million fee.

The county must pay the banks, including JPMorgan Chase & Co. and Bank of America Corp., about $50 million on May 30 under a forbearance agreement struck two weeks ago, the second delay since April 1. The banks were forced to acquire about $850 million of the county's adjustable-rate sewer bonds under agreements to act as buyers of last resort.

``Informally, we've been told the banks think that would be appropriate,'' said Jim White, president of Birmingham-based financial adviser Porter, White & Co., of the payment. ``We don't know what we're going to do about that yet.''

County officials are negotiating with the banks to restructure $3.2 billion of sewer debt and avoid bankruptcy after interest rates soared following the downgrades of XL Capital Assurance Inc. and Financial Guaranty Insurance Co., which insured the bonds. A 60-day payment extension might provide breathing room for county officials and bankers to reach a deal.

The extension would push to Aug. 1, a $50 million payment that was due April 1 and another $50 million payment due July 1. In a Feb. 20 disclosure, the county said its sewer fund had $105 million.

Event of Default

JPMorgan spokesman Brian Marchiony declined to comment. Spokespeople or bankers for the seven other institutions in talks with the county -- Bank of America Corp., Societe Generale SA, Regions Financial Corp., State Street Corp., Bank of New York Mellon Corp., Lloyds TSB Group Plc and Bank of Nova Scotia -- didn't immediately return calls seeking comment.

If Jefferson County, which has 659,000 residents, doesn't make the $25 million payment, the bond insurers would have to make the $50 million payment due May 30.

The county's failure to make a payment would constitute an event of default under the indenture for the sewer bonds. Bondholders and bond insurers may then sue the county to raise sewer rates or ask the court to appoint a receiver to administer and operate the sewer system and raise rates to pay the debt, according to the indenture.

Michael Gormley an XL Capital Assurance spokesman and Brian Moore, a FGIC spokesman didn't immediately return calls seeking comment.

Roots of Crisis

The county's financial crisis began in February after FGIC and XL, which guarantee $2.8 billion of the county's sewer debt suffered credit rating cuts because of losses on securities tied to subprime mortgages. That caused the investors to sell back the county's $850 million variable-rate bonds to banks and shun about $2 billion of debt whose interest is determined by auctions. Rates on some of the county's debt increased to as high as 10 percent.

Compounding the problem, interest-rate swaps the county bought from JPMorgan, Bear Stearns Cos., Bank of America and Lehman Brothers Holdings Inc., to shield it against rising borrowing costs have backfired. The floating rates it pays on its bonds have climbed while the variable rates banks pay the county under the agreements has declined, pushing interest costs higher.

Cut to Junk

The surging debt costs led the credit-rating companies to cut the county's sewer bonds to junk status. That, in turn, triggered clauses in bond and derivative contracts that gave banks the right to force the county to terminate the swaps at a cost of $277 million and buy back $850 million of the floating- rate debt over four years.

Without restructuring its bonds, interest costs on Jefferson County's sewer debt may reach $250 million, nearly twice the $138 million the system produces in revenue, Jefferson County Commission President Bettye Fine Collins estimated in March.

The county has proposed a debt restructuring backed by $115 million of annual sewer revenue and $30 million in unallocated sales tax receipts from a 1 percent sales tax the county collects to repay $1 billion of bonds issued for schools. The plan needs approval from the state Legislature.

In recent negotiations, the county agreed to cover sales- tax shortfalls on the new debt with $27 million of sewer revenue previously dedicated to construction.

The insurers have proposed that the county increase sewer revenue by assessing fees to about 100,000 septic-tank users in the county who don't use the sewer system, yielding $38 million, and replacing old water meters. The plan also calls for improved customer billing.

Commission President Collins opposes the non-user fee and is among those saying the county can't raise sewer rates.

To contact the reporter on this story: Martin Z. Braun in New York at mbraun6@bloomberg.net;

Last Updated: May 28, 2008 14:05 EDT

[SixSigmaBrazil]

qualcuno diverra' padrone della contea e non delle fognature solamente.....