Understanding the Impact of the Birmingham Bankruptcy

“For the roughly 660,000 residents of Jefferson County, which includes Birmingham, the state’s largest city, bankruptcy means a threat to essential jobs and services. More immediately, it means sewer system rate hikes, an added burden on poor people already saddled with some of the highest rates in the country.

‘It’s terrible for the sewer rate payer,’ said John Young, a receiver appointed by the Jefferson County Circuit Court to manage the sewer system on behalf of creditors. He said double-digit rate increases were already planned.

Consequences of the filing include a likely increase in the county’s cost to raise funds in the bond market, at least temporarily.

The impact of the bankruptcy was seen in the U.S. municipal market on Thursday. More than $1 million of the county’s thinly traded sewer bonds due in August 2012 traded at 52 basis points over Municipal Market Data’s triple-A scale as an investor required a higher yield, an MMD analyst said.

That was a big jump from the last time the issue traded on August 4 when a block of $3.5 million bonds changed hands at 7 basis points over MMD’s triple-A scale.

‘The name is getting people scared,’ said MMD analyst Domenic Vonella.”

Here is a link to this latest article: http://www.reuters.com/article/2011/11/10/us-usa-alabama-jeffersoncounty-idUSTRE7A95CT20111110

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s