Jefferson County prepared to file for bankruptcy

Alabama County to Vote on Extending Debt Forbearance With Banks

By William Selway

Oct. 1 (Bloomberg) -- Jefferson County, Alabama, will vote tomorrow on extending for a week the agreement with creditors that has allowed it to avoid making full payments on some of the $3.2 billion of bonds that have pushed it toward bankruptcy.

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Syncora Guarantee Inc. and Financial Guaranty Insurance Co., which insure $2.8 billion of the bonds, have already sued the county, saying it should be stripped of its control over the sewer system because it has defaulted on its obligations under the terms of the $3.2 billion of bonds. The insurers recommended that the sewers be placed in the control of a receiver, who could raise rates to help pay back bondholders.

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The county is among U.S. states and cities in the $2.6 trillion municipal market whose finances have been pinched by debt costs that have risen more than fourfold in some cases, and it has prepared to file for bankruptcy should no agreement be reached.

Should the county seek court protection from creditors, it would be the biggest municipality to go bankrupt since 1994, when Orange County, California, was felled by bad investments.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a9wIq5iA...

Get ready for this bond bubble to esplode... lower home values = lower tax revenues = more municiple bankruptcies.