Sunday, April 13, 2008

Biggest Bankrupty in the Municipal Market's History?

This is how it ends for the little county that was going to teach America how to use interest-rate swaps

By Tec Jonson

Some juicy reading for a Sunday. Any parallels on our local financing? From Bloomberg.com:

April 11 (Bloomberg) -- They're talking more about Chapter 9 municipal bankruptcy in Jefferson County, Alabama, the home of the largest city in the state, Birmingham.

Who can blame them?

The county is now being whipsawed by an ill-thought-out debt policy and the collapse of the bond insurers. Credit-rating downgrades all around have triggered a series of events that are no longer in the county's control, leaving it at the mercy of securities firms that have little room for maneuver themselves.

This has produced a steady series of stories in my new favorite newspaper, the Birmingham News, all about how the county is preparing to declare bankruptcy any day.

Perhaps the best article ran on Sunday, April 6. It began: "Jefferson County officials have laid the groundwork for the largest municipal bankruptcy in the nation's history while publicly saying they have no imminent plans for a filing.''

The one that ran on Wednesday, April 9, was no less compelling: "Talks on the sewer system's debt crisis aren't making progress, increasing the odds that the county will file municipal bankruptcy, Jefferson County Commission President Bettye Fine Collins said Tuesday.''

This is how it ends for the little county that was going to teach America how to use interest-rate swaps.
Read the full article here.

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