Following A 70% Concession From JP Morgan, Here Is The Live Jefferson County Reorganization Vote Webcast

Tyler Durden's picture

One short month ago, when the Jefferson County, AL commissioners sat down to vote on whether or not to file for Chapter 9, they decided to delay the vote by a month. Until today. Follow along as the final vote takes place, only this time the expectation is that the commissioners will agree to the proposed reorganization as JPM and other creditors have agreed to substantial concessions of $750 million of the total $1.1 billion loan. Naturally, if this settlement is rejected, the county will declare bankruptcy. Incidentally, what Jefferson County has shown the world is that a market test on real manageable LTV on muni debt is about 70% lower than currently marked. To Meredith Whitney's Chagrin, however, most municipalities will use up all their cash first before acknowledging reality and pushing for comparable hard line negotiating tactics with creditors.

Some more from Bloomberg:

JPMorgan Chase & Co., which arranged financing for most of the sewer debt that threatens to bankrupt Jefferson County, Alabama, is set to offer as much as 70 percent of the concessions from creditors to ease the county’s fiscal crisis.


JPMorgan would make about $750 million of about $1.1 billion in concessions under a proposal the county’s five commissioners plan to vote on today, said Commissioner Joe Knight in an interview yesterday. If the settlement is rejected, the county may declare what would be the biggest municipal bankruptcy in the U.S.


The size of JPMorgan’s offer was confirmed by a second person familiar with the negotiations, who requested anonymity because the talks are continuing. The remaining amount of about $350 million will be split among banks that provided credit lines for the debt, bond insurers and investment funds.


JPMorgan, which managed the county’s sewer refinancings in 2002 and 2003, holds about $1.2 billion of the county’s $3.1 billion sewer debt, the person said.


Issues blocking a settlement over the sewer debt have been resolved, Jefferson County Commission President David Carrington said.

All great. The only problem is that Jeffco doesnt have the money to even pay a 70% haircut loan.

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Version 7's picture

Vote while there's money for the ballot

wang's picture
wang (not verified) trav7777 Sep 16, 2011 12:57 PM

Meredith Whitney's Chagrin?? No

The MSM and its shills came out in force against Merdith spreading lies about what she said. including but not limited to blowhard David Kocktok ( )

What she said nine  months ago is that  that people would start to worry about Munis within 12 months

 the interview

GeneMarchbanks's picture

Dimon... a hero again.

Right, so as munis rip through remaining cash, they hope to get loan retructuring only to not be able to pay that either because... well because they are broke.


Good to see new games being invented.

trav7777's picture

Rentier dream is to have them perpetually only making the minimum payment

Pladizow's picture

What would be the benefit of a concession at 30%, rather than bankruptcy?

A.W.E.S.O.M.-O 4000's picture

What? A criminal organization not being reimbursed 100 pennies on the dollar for fraud?


This is an outrage!

Waffen's picture

gosh, declaring bankruptcy used to be the cool thing to do :(

SilverDosed's picture

So does this mean my sewer bill will quit being 5-10 times my water bill?

buzzsaw99's picture

Jefferson County officials went to jail, JPM, well, you know...

Gecko Junior's picture

Could munis be the new subprime? 

This has me giddy.

John Law Lives's picture

Do you actually want municipalities to declare bankruptcy and see bondholders lose their shirts? Really?

topcallingtroll's picture

Yeah, sorta.

If the alternative is an unfair subsidy that hoses the taxpayers.

NoTTD's picture

Yes.  Clear enough?  Anarchy for the USA.  It's coming someday.

LowProfile's picture

Clearly a rhetorical question.

Robslob's picture

Taking a play out of Greece palybook...must spend all money to maximize leverage and avoid "reach-arounds"!


Love this...too bad AIG didn't do this before they paid out...wait a minute, they did, then got paid by the taxpayer not to...fuck


I am with pladizow...why wouldn't they declare bankruptcy versus being 30% indebted to "squid junior"?

greyghost's picture

when you create money out of thin air, when is a 70% haircut, a 70% haircut? looks as if the banks are 30% or more up here...what with bonuses and such.

Dr. Richard Head's picture

If a dollar is created in the woods and 30 people spend it does it still exist?

Quadlet's picture

Gold @ 1776.  How ironic.

buzzsaw99's picture

down two fiddy. that damn loch ness monster!

Quadlet's picture

When JPM restocks on silver, so will I.

Herman Strandschnecke's picture

That stage looks like the arse end of an English tug boat

Robslob's picture



In seeing this again it seems I have greatly miscalculated my entire financial state of being.


New gameplan: The sooner I go broke the sooner I will have more money to spend!


Added bonus: I will no longer be required to work for it!



John Law Lives's picture

"Incidentally, what Jefferson County has shown the world is that a market test on real manageable LTV on muni debt is about 70% lower than currently marked."

"real manageable LTV on muni debt" re. Jefferson County does not represent the broader muni market. It is an egregious case. There are more egregious cases, but muni bond defaults are still rare... especially among GO bonds.

So far, Whitney is way off on her prediction that hundreds of billions of dollars of municipal debt would end in default in 2011. Not even close, Whitney!

faustian bargain's picture

Operative phrase being "so far". Keep on hopin'!

centerline's picture

Hard to call the timing in this market. But the direction is pretty clear.

Jumbotron's picture

Muni austerity.....bitchez !

Miss Expectations's picture

Sewer debt.  How ironic.

r101958's picture

These guys ever going to show up.....or did I miss it?

NoTTD's picture

And short cuts for all!

g's picture

There you have it, screw the taxpayers some more.

LongOfTooth's picture

So did they or didn't they?  TIA


GtownSLV's picture

They agreed to try to come up with a settlement to avoid BK. Throw the threat of BK out and let the 70% bond haircuts begin.


navy62802's picture

Isn't that a default on the county's debt obligations?

JohnG's picture

Yeah, they passed it, one nay vote.


If it's legal to install new septic tanks there I'm opening a plumbing business.  Main selling point: Explaining exponential growth in the rate payers sewer bill.

Rate payers just got royally screwed.

MM's picture

You think TPTB are going to let someone make them look bad? Hell no, they're going to do the misdirect and make Whitney look bad on her "call". Throwing money to munis or allowing them to cook their books to keep them alfoat until TPTB can get the markets to correct (markets correct, effin' hilarious, I crack myself up). Don't think it happens? I've seen the wizard behind the curtain.

And the Morgue is going to eat a loss? You're effin' jokin' right? JPM paid a substantial bribe, errr, worked hard to negotiate the deal from GS, who had already landed the con. The JPM will help out JeffCo by refinancing the balanace for, oh let's say, 100 years. The original debt was $250MM. Please tell me you don't think other munis haven't been sucked in to this CDS con. Hell, they sold this shit around the world. To everyone.

Confirmation on refi: The settlement today, if approved, would include erasing more than $1 billion in debt and refinancing $2.05 billion to pay off old debts, contingent on creditors agreeing to an additional $30 million in concessions. The proposal would also include sewer rate increases as much as 8.2 percent a year for three years and 3.25 percent a year afterward until the debt is paid off. - ROFLMAO!

Regardless of what dog and pony show TPTB have prepared for us from one day to the next, watching gold move up $65 in 12 hours (after the beating it has taken) and dragging silver behind it assures me of one thing. They're grasping at straws and it is gonna blow. Bet your last silver dime on that. The key may very well be the EU's habitual return to the teet of Germany. Just sayin'.

ThirdCoastSurfer's picture

The amount of forgiveness is not materially different than last month. 

The rate increases are (higher), and (but) they are more spread out. 

The main contingencies of last month's proposal, however, were that the State of Alabama would need to back-stop a fund to make-up for any shortfall in revenues as well as backing the entire debt.

The State refused to even consider these proposals and now we get no details of the arrangement other than $1.1 billion is forgiven and a rate increase of roughly 17% over the next 18 months is agreed to instead of the 25% initially proposed. 

This sudden secrecy and agreement is an obvious attempt to divert attention and kick the can. After all, you pass the deal, you default when the shortfall fund is depleted and you start the whole thing over again. 

Anonymouse's picture

"... most municipalities will use up all their cash first before acknowledging reality and pushing for comparable hard line negotiating tactics with creditors."

Probably true.  I imagine the concept of fraudulent conveyance doesn't apply to municipalities.

OTOH, so much (not all, but a lot) of the muni market is crooked and a convenient way to pad the bank accounts of lawyers, bankers, and especially developers.  I used to cover Section 8 housing where the construction cost (or valuation on refi) was about $150 psf when comparable properties were around $80 psf.  I saw it in college dorm construction as well.

An incredible scan, and the reason that programs like this will never be reformed.  Too much money in it for the participants, and those who want to reform it are easily portrayed as anti-poor, anti-minority, etc.

Youri Carma's picture

Alabama county makes deal with J.P. Morgan to avert bankruptcy

Alabama county could avoid bankruptcy: report

A group of the county’s major creditors is expected to approve the settlement, which would include sewer rate increases of as much as 8.2% for three years .

Jefferson County refinance $2.05 billion, if creditors agree to $30 million in future concessions.

rtbarr's picture

One of my best friends lives in Hoover, AL and has water and sewer from the Jefferson County system. His water bill and sewer bill are $300-400 per month. My water and sewer total about $30-45 at the most. I have a swimming pool and water my yard quite a bit. He can't afford to water his yard. Another friend in Mountain Brook, AL, also on JeffCo utilities, calculated it cost him $15 every day he runs his sprinkler system.

One tragedy, and the reason people went to jail, was that the money was spent foolishly and probably fraudulently, and the sewer system is not really much better off after spending the money.

Jefferson County also took the easy way out 30+ years ago and enacted a county "income tax" of 1% that eventually was challenged in court and overturned, so the county lost a large portion of their income at just the wrong time when the sewer bond auction rate market froze in August 2007. Jefferson County is now reduced to selling assets in a sort of municipal yard sale and bake sale:

Sic transit gloria.