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Jefferson County Refinances $2.24 Billion of Sewer Warrants in Mega Deal 

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By Barnett Wright

The Birmingham Times

Jefferson County today completed its refinancing of $2.24 billion of sewer revenue warrants for a savings of $1.17 billion, which reduces the County’s payments on the overall sewer debt, county officials announced.

The refinancing means sewer rates will remain at 3.49 percent for the foreseeable future and the transaction comes just over 10 years after the county exited a historic bankruptcy.

“This is great news for the citizens of Jefferson County. It stabilizes the financial position of the County,” said Commission President Jimmie Stephens. “We made promises when we emerged from bankruptcy to rebuild our credit and reputation, today we kept those promises.”

Commissioner Joe Knight, Chair of the Finance Committee, added “Since the bankruptcy, we have put Jefferson County back together piece by piece – the market confirmed our efforts today. It has been a collective endeavor with our team at the County, and their hard work has made this possible.”

County Manager Cal Markert said the transaction is a reflection of the County staff and the Department of Environmental Services “who have created a sustainable, well-run department that is capable of serving the citizens for many years to come.”

County leaders have said refinancing of the 2013 debt was always part of the “long-term plan” for the county as it came out of bankruptcy and Wednesday’s refunding not only stabilizes rate increase but also includes a provision for a customer assistance program.

Nearly ten years ago the County emerged from bankruptcy after closing on about $1.8 billion in new sewer warrants used to pay creditors.

The exit came after filing a $4.23 billion bankruptcy in Nov. 2011, which was the largest by a U.S. city or county until it was overtaken in July 2013 by Detroit’s $18 billion case.

Stephens told The Birmingham Times that the county now has an investment-grade credit rating which made selling bonds to refinance the debt attractive to investors.

“We received over $26 billion worth of orders [on Wednesday] for $2.3 billion worth of debt,” Stephens said. “We had so many people who wanted it our underwriters are having to allocate that debt to distribute it.”

The county sold new bonds in 2013 as part of its restructuring and the sewer system’s finances have turned around since then, according to the bond documents.

The 2013 sewer warrants priced to yield 6.85 percent in 30 years, over 2.7 percentage points higher than AAA rated bonds at the time. This week, the new 2024 bonds were being offered to investors at a yield of 4.69 percent for bonds maturing in 2053, according to a pre-marketing pricing wire seen by Bloomberg as reported by yahoo.com.

Stephens said the term of the warrants were 40 years before, “but we knocked 10 years off of our refunding and this is at 30 years. So, we keep the same maturity as we had in 2013 and we’re paying a lot less in interest” because our credit is a lot better, he said.

The commission president added, “rates will remain stable … all of the uncertainly that has surrounded the Jefferson County sewer finances for the past two decades is now behind us.”