Jefferson County, Ala., Chapter 9 plan of adjustment effective Dec. 3

By Caroline Salls

Pittsburgh, Dec. 3 - Jefferson County, Ala.'s amended Chapter 9 plan of adjustment took effect on Tuesday, according to a filing with the U.S. Bankruptcy Court for the Northern District of Alabama.

As previously reported, the amended plan was confirmed on Nov. 22.

The amended plan was filed on Nov. 6 and provides for up to an additional $300 million in total concessions and credit enhancement from certain sewer creditors than the original plan filed in July.

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.

The county priced $2,572,790,000 of series 2013 sewer revenue warrants on Nov. 20, with proceeds to be used to refund and retire existing sewer revenue bonds, as well as to pay past due debt service on those refunded bonds.

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 million, 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.

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

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