Auction Bond Market Collapse: Move Over OC, New Muni BK King
More "collateral" damage from the Auction Bond Market Collapse...
Financial advisers for Jefferson County, the most populated county in Alabama, and home to the city of Birmingham...
met yesterday with Bush administration and Federal Reserve officials as the county contends with rising borrowing costs that have pushed it close to bankruptcy.
Jefferson County is reeling from interest rates on variable-rate bonds that jumped as high as 10% when the auction-rate securities market collapsed
and the county's bonds, backed by ailing insurers FGIC Corp. and XL Capital Assurance, were shunned by investors.
Without restructuring its bonds, interest costs on its sewer debt may reach $250 million, nearly twice the $138 million the system produces in revenue.
The county's financial problems have been compounded by $5.4 billion of interest-rate swaps with
JPMorgan; BofA; Bear Stearns and Lehman Brothers that were intended to shield it from higher borrowing costs.
The floating rates it pays have climbed while the variable rate banks pay the county under the agreements has declined, pushing costs higher.
A series of credit-rating cuts require the county to post some $180 million in collateral it doesn't have.
County commissioners have said bankruptcy may be an option if it can't reach an agreement with creditors.
It would be the largest municipal bankruptcy by the amount of outstanding debt, eclipsing Orange County, California.
The Nattering One muses... credit rating cuts required reserve CASH to be posted, which the county DOESN'T have.
Remember what we told you about downgrades, reserves and Level 1 capitalization of the banks, lenders and Wall Street brokers...
This un-kind margin call is occuring throughout the financial system and we suspect that a VERY large brand name is about to be brought down by such a squeeze.
Hattip to Bloomberg.
Financial advisers for Jefferson County, the most populated county in Alabama, and home to the city of Birmingham...
met yesterday with Bush administration and Federal Reserve officials as the county contends with rising borrowing costs that have pushed it close to bankruptcy.
Jefferson County is reeling from interest rates on variable-rate bonds that jumped as high as 10% when the auction-rate securities market collapsed
and the county's bonds, backed by ailing insurers FGIC Corp. and XL Capital Assurance, were shunned by investors.
Without restructuring its bonds, interest costs on its sewer debt may reach $250 million, nearly twice the $138 million the system produces in revenue.
The county's financial problems have been compounded by $5.4 billion of interest-rate swaps with
JPMorgan; BofA; Bear Stearns and Lehman Brothers that were intended to shield it from higher borrowing costs.
The floating rates it pays have climbed while the variable rate banks pay the county under the agreements has declined, pushing costs higher.
A series of credit-rating cuts require the county to post some $180 million in collateral it doesn't have.
County commissioners have said bankruptcy may be an option if it can't reach an agreement with creditors.
It would be the largest municipal bankruptcy by the amount of outstanding debt, eclipsing Orange County, California.
The Nattering One muses... credit rating cuts required reserve CASH to be posted, which the county DOESN'T have.
Remember what we told you about downgrades, reserves and Level 1 capitalization of the banks, lenders and Wall Street brokers...
This un-kind margin call is occuring throughout the financial system and we suspect that a VERY large brand name is about to be brought down by such a squeeze.
Hattip to Bloomberg.
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