According to a Reuters report, the bond insurers involved in the record-setting Jefferson County bankruptcy case found themselves in dire straights as a result of the county’s shrinking payments on its $3.14 billion debt. Syncora Guarantee Inc. was forced to file a motion to temporarily increase the county’s payments. The company believed that “its very viability as a going concern may be threatened” by the situation, according to its lawyers.
The solution calls for payments of over $5 million through May, according to a statement issued jointly by attorneys. Lawrence Larose, a lawyer for the Assured Guaranty Corp, hailed the agreement as a “useful and equitable solution of the issues.”
The debt insurers claimed that the county had paid its legal expenses from the beleaguered sewer system’s revenue. This was not permitted under the terms of their bankruptcy, as that revenue was meant to go towards paying off creditors.
Credit agencies, including Standard & Poor’s and Moody’s Investors, have each explored the possibility of further downgrades to Jefferson County’s credit rating. Standard & Poor’s was unlikely to issue a further downgrade in light of the county’s payment of February 1. However, Moody’s was still reviewing the situation and has not yet come to a decision.