Jefferson County, Ala., files amended Chapter 9 plan of adjustment

By Caroline Salls

Pittsburgh, Nov. 6 - Jefferson County, Ala., filed an amended Chapter 9 plan of adjustment Wednesday with the U.S. Bankruptcy Court for the Northern District of Alabama.

On Oct. 31, the county asked the court to continue its plan confirmation hearing to Nov. 20 from Nov. 12 to give case parties time to complete documentation for the modified plan, which will provide for up to an additional $300 million in total concessions and credit enhancement from certain sewer creditors.

Jefferson County said the modified plan will also rectify an economic deficiency in the amended financing plan adopted by the county commission in July.

In an Oct. 31 news release, Assured Guaranty said the plan support parties, including Assured Guaranty Municipal Corp., have agreed to additional measures to allow the county to emerge from bankruptcy.

Under the terms of an agreement, Assured Guaranty Municipal will insure $500 million of proposed Jefferson County senior-lien sewer revenue warrants.

Creditor treatment

Treatment of creditors under the amended plan will include the following:

• Administrative claims and 503(b)(9) claims will be paid in full in cash;

• Holders of sewer warrant claims, bank warrant claims and primary standby sewer warrant claims will choose between two distribution options, depending on whether or not they make a commutation election.

If they make the election, these creditors will receive cash from refinancing proceeds, remaining accumulated sewer revenues, sewer warrant indenture funds or a combination of those in an amount equal to 80% of the adjusted principal amount of each holder's warrants.

If they do not make the election, these creditors will receive cash equal to 65% of the adjusted principal amount of each holder's warrants and will retain any sewer wrap payment rights against the applicable insurer.

Regardless of the option selected, each holder will receive a distribution in cash on account of any applicable reinstated sewer warrant principal and interest payments;

• Holders of sewer warrant insurers claims will receive a share of $165 million in cash from refinancing proceeds, remaining accumulated sewer revenues, sewer warrant indenture funds or a combination of those, as well as a separate cash distribution equal to a non-commutation true-up amount, payment in full in an amount equal to each insurer's covered tail risk and distributions of cash on account of the reinstated payments.

Under the amended plan, these creditors will also receive any excess refinancing proceeds to which they are entitled and, subject to the issuance of the new sewer wrap policy by Assured, the amounts otherwise distributable to Syncora will be reduced by $12.25 million and to FGIC by $8.5 million.

Sewer warrants held by FGIC will be reduced by $5.5 million;

• In exchange for other specified sewer claims, JPMorgan will receive $10, and Lehman Brothers Special Financing, Inc. will receive $1.25 million;

• Holders of sewer swap agreement claims and other standby sewer warrant claims will receive no distribution;

• Holders of school claims will retain their rights to school warrants, which will be repaid under the terms of modified indentures;

• Holders of Board of Education lease claims will retain all of their limited payment rights and recourse against the collateral securing obligations under the Board of Education lease indenture;

• Holders of other secured claims will either be paid in full in cash, receive the collateral securing the claims or have specified defaults cured;

• Holders of series 2001-B GO claims and standby GO warrant claims will receive a share of $123,291 in cash and replacement 2001-B GO warrants, as well as a share of $750,000 in settlement of pre-bankruptcy claims;

• Holders of GO policy claims will receive $503,046 for pre-bankruptcy interest paid under the GO insurance policies in April 2012 on April 1, 2014; $2.88 million for principal paid in April 2012 on April 1, 2014; $2.97 million for principal paid in April 2013 on April 1, 2015; and $1.5 million in settlement of fees and expenses claims;

• Holders of general unsecured claims will receive a distribution from a claims pool;

• The rights of holders of other impaired claims will remain unaltered; and

• The holders of subordinated claims will receive no distribution.

Original plan comparison

Meanwhile, creditor treatment under the original plan was slated to include the following:

• Administrative claims and 503(b)(9) claims were to be paid in full in cash;

• Holders of sewer warrant claims were to choose between two distribution options, depending on whether or not they made the commutation election.

If they made the election, these creditors were to receive cash from refinancing proceeds, remaining accumulated sewer revenues, sewer warrant indenture funds or a combination of those in an amount equal to 80% of the adjusted principal amount of each holder's warrants.

If they did not make the election, these creditors were to receive cash equal to 65% of the adjusted principal amount of each holder's warrants.

Regardless of the option selected, each holder was to receive a distribution in cash on account of any applicable reinstated sewer warrant principal and interest payments;

• Holders of sewer warrant insurers claims were to receive a share of $165 million in cash from refinancing proceeds, remaining accumulated sewer revenues, sewer warrant indenture funds or a combination of those, as well as a separate cash distribution equal to a non-commutation true-up amount, payment in full in an amount equal to each insurer's covered tail risk and distributions of cash on account of the reinstated payments;

• The holder of JPMorgan sewer revenue indemnification claims and general obligation (GO) swap agreement claims was to receive $10;

• Holders of sewer swap agreement claims and other standby sewer warrant claims were to receive no distribution;

• Holders of school claims were to retain their rights to school warrants, which were to be repaid under the terms of modified indentures;

• Holders of Board of Education lease claims were to retain all of their limited payment rights and recourse against the collateral securing obligations under the Board of Education lease indenture;

• Holders of other secured claims were to either be paid in full in cash, receive the collateral securing the claims or have specified defaults cured;

• Holders of series 2001-B GO claims and standby GO warrant claims were to receive a share of replacement 2001-B GO warrants and a share of $750,000 in cash distributions;

• Holders of GO policy claims were to receive $503,046 for pre-bankruptcy interest paid under the GO insurance policies in April 2012 on April 1, 2014; $2.88 million for principal paid in April 2012 on April 1, 2014; $2.97 million for principal paid in April 2013 on April 1, 2015; and $1.5 million in settlement of fees and expenses claims;

• Holders of general unsecured claims were to receive a distribution from a claims pool;

• The rights of holders of other impaired claims were to remain unaltered; and

• The holders of subordinated claims were to receive no distribution.

Jefferson County filed for bankruptcy on Nov. 9, 2011 under Chapter 9 case number 11-05763.

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