Alabama’s Jefferson County files for biggest municipal bankruptcy in US history

Alabama’s Jefferson County filed for the largest municipal bankruptcy in US history on Wednesday.

Jefferson County, which owes more than $3 billion on a failed sewer deal, was forced to file after a tentative rescue plan with creditors fell apart, the Wall Street Journal reported. The county’s five commissioners voted four to one to file the bankruptcy.

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The rescue plan would have refinanced the sewer bonds the county owed. In Chapter 9 papers filed, Jefferson County listed assets and debt of more than $1 billion, Bloomberg reported. Filing was necessary for the county, home to Birmingham, after the talks with creditors failed. The creditors included JP Morgan Chase, which had signed an agreement in September to reorganize the sewer debt.

County officials said JP Morgan would have provided $750 million of the needed $1 billion, Bloomberg reported.

“There was an impasse reached,” Kenneth Klee, the county’s bankruptcy lawyer, Bloomberg reported. “None of the creditors — zero — signed up to the deal that we have been negotiating for six weeks.”

The county has been struggling with this debt since 2008, when Wall Street’s downturn produced unforeseen costs on $3.14 billion of bonds that are paid for with revenue from its sewer system, Bloomberg BusinessWeek reported.

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A spokesman for JP Morgan Chase said the bank worked “very hard” with the county to avoid filing. He added that the bank "will continue to work toward a fair and reasonable solution for the county and all creditor constituents involved,” WSJ reported.

"Bankruptcy will negatively impact not only the Birmingham region, but also the entire state," said Alabama’s Governor Robert Bentley, WSJ reported.