March 28, 2024

Media Decoder Blog: Content Lives On, Even if Web Site Doesn’t

Some journalists just can’t stop working.

As the magazine Budget Travel winds its way through bankruptcy court and its lawyers insist that its staff stop working, the Web site continues to chug along with periodic posts by Robert Firpo Cappiello. On March 1, he wrote about how travelers can save on Rail Europe this month. On Feb. 27 he debated whether Las Vegas was safe. On Feb. 22, he introduced readers to “America’s coolest small town.”

But the lawyers handling Budget Travel’s bankruptcy had no idea that Budget Travel was still publishing material. According to e-mails included in the bankruptcy filing, Robert A. Wolf, a legal adviser on the case, ordered Elaine Alimonti, Budget Travel’s vice president and publisher, in a Feb. 14th e-mail to “cease and desist immediately from conducting any and all business activities on behalf of Budget Travel.”

Robert Geltzer, the trustee handling the case, was also not aware that the Budget Travel Web site was still producing new content.

“I don’t read the Web site,” Mr. Geltzer said. “It’s not an official document.”

According to e-mails in the filing, Ms. Alimonti tried to explain to the courts that it isn’t easy to simply shut a Web site down.

“Because the Budget Travel business is primarily digital, and cloud-based, operations continue beyond the control of the staff: Consumers are still able to schedule vacations via the Web site; consumers are still buying and paying for subscriptions.”

She urged the bankruptcy court to continue to let the Web site function because it made it desirable to potential bidders, including Morris Communications and Travel Leaders. Both companies declined to comment about whether they were interested in Budget Travel.

Mr. Geltzer said that Allan L. Gropper, the federal bankruptcy judge on the case, was flexible about the process of shutting down the Web site. But Mr. Geltzer was firm that he would not pay any Budget Travel employees for their continued efforts.
“No one will be paid a penny for it,” he said.

Budget Travel’s long-running financial problems stem from its relationship to the company owned by the Wall Street investor Alphonse Fletcher Jr. of Fletcher International. In 2011, Mr. Fletcher filed a lawsuit against the Dakota, a residence on the upper west side of Manhattan, accusing the co-op of race discrimination for not letting him purchase another apartment in the building. The building’s board argued that its concerns were financial.

Since then, Budget Travel, along with many other operations owned by Mr. Fletcher’s company, have fallen into the hands of the bankruptcy court. According to court records, at least four vendors recently sued Budget Travel for not paying its bills for paper stock, rent and staffing services.

Ms. Alimonto and Mr. Cappiello did not respond to e-mails and phone messages left for them. But in a letter Ms. Alimento sent to Judge Gropper on Feb. 19, she wrote, “The asset is such that potential acquirers will lose interest if the company is left to deteriorate.”

Article source: http://mediadecoder.blogs.nytimes.com/2013/03/06/content-lives-on-even-if-web-site-doesnt/?partner=rss&emc=rss

Media Decoder Blog: Studios Have Differing Responses to Visual Effects Company’s Financial Woes

LOS ANGELES—As expected, Rhythm and Hues, the El Segundo, Calif.-based visual effects supplier, has filed for protection under Chapter 11 of the United States Bankruptcy Code, and the filing shows that its principal customers—20th Century Fox, Universal Studios and Warner Brothers—have split in their approach to the company’s financial woes.

According to filings, made on Wednesday with the bankruptcy court in Los Angeles, Fox and Universal agreed to extend credit that will allow the company to proceed with work on their films, presumably including Fox’s “Percy Jackson: Sea of Monsters” and Universal’s “R.I.P.D.”

But Warner, according to the effects company’s motion, which seeks extra time to file a schedule of assets and liabilities, has demanded the “return of all materials” related to three of its scheduled movies. Two of those were identified in the filings as “Black Sky,” a thriller from the company’s New Line Cinema unit, and “300: Rise of an Empire,” which was made in partnership with Legendary Entertainment, and is set for release in August. The third film, according to a person who was briefed on the matter but spoke on condition of anonymity because of the court proceedings, is “The Seventh Son,” a Legendary film, which is scheduled for release by Warner in October.

According to the filings, Warner has claimed that it is owed $4.9 million, which it has paid for work that is not yet completed.

“Unfortunately, with respect to the current projects,” a Rhythm and Hues filing noted, the company “will be unable to complete them at the bid amount, and therefore needs additional funding to pay the costs.” Three Warner-related entities are identified as being among the 20 unsecured creditors with the largest claims against the company, although it also noted that the status of the claims by those three are “disputed.”

The person briefed on the matter said he did not expect the studio to alter its release plans for the films.

While no full schedule of assets and liabilities has yet been filed, the court papers said Rhythm and Hues had about $27.5 million in assets at the end of 2012, and about $33.8 million in liabilities. One of the company’s filings identified Rhythm and Hues as one of the “top eight” visual effects companies in the world, and said it had contributed to more than 150 feature films. Those include “Life of Pi,” a Fox film whose visual effects have been nominated for an Oscar.

The Rhythm and Hues bankruptcy compounds financial troubles across the effects industry, which has been affected by intense global competition.

A Warner spokesman declined to comment on the filings.

Article source: http://mediadecoder.blogs.nytimes.com/2013/02/14/studios-have-differing-responses-to-visual-effects-companys-financial-woes/?partner=rss&emc=rss

Bucks: Ask About Navigating Student Debt

Struggling to pay your student loans? Have a question about how to navigate the debt trap?

You aren’t alone. There are more than 37 million borrowers with outstanding student loans, and nearly one in six is in default. Millions more are behind on their payments but not yet in default.

Two New York Times reporters and Geoffry Walsh, an expert on student debt and bankruptcy at the National Consumer Law Center, are available to answer questions about ways to avoid default, pay off student loans or try to expunge student loans through bankruptcy court.

The reporters, Ron Lieber and Andrew Martin, wrote recent articles about the difficulties of paying back student loans as part of The New York Times’s series Degrees of Debt, which examines the implications of soaring college costs and the indebtedness of students and their families.

Mr. Lieber described how extraordinarily difficult it is for borrowers to expunge their student loans in bankruptcy court. As told through the story of a legally blind man in Ohio named Doug Wallace Jr., a borrower needs to convince a judge that his or her economic prospects are beyond hope.

“Do I think I’m hopeless?” Mr. Wallace said. “Well, yeah, I mean, by looking at it you would think I am hopeless. “

Mr. Martin detailed how the debt collection industry is cashing in on the rising number of borrowers who default on their student loans. Last year, for instance, the Department of Education paid more than $1.4 billion to private collection agencies and other groups to collect defaulted student loans.

“While the Department of Education debt collection contract has been one of the most highly sought-after contracts within the ARM industry for years, I believe it is now THE most sought-after contract within this industry, centered within the most sought-after market — student loans,” Mark Russell, a mergers and acquisitions specialist, wrote in InsideArm.com, an online publication for the debt collection industry, in October.

If you have a question about navigating student debt for the reporters or Mr. Walsh, leave it in the comments section below.

Article source: http://bucks.blogs.nytimes.com/2012/09/10/ask-about-navigating-student-debt/?partner=rss&emc=rss

Bucks Blog: Ask About Navigating Student Debt

Struggling to pay your student loans? Have a question about how to navigate the debt trap?

You aren’t alone. There are more than 37 million borrowers with outstanding student loans, and nearly one in six is in default. Millions more are behind on their payments but not yet in default.

Two New York Times reporters and Geoffry Walsh, an expert on student debt and bankruptcy at the National Consumer Law Center, are available to answer questions about ways to avoid default, pay off student loans or try to expunge student loans through bankruptcy court.

The reporters, Ron Lieber and Andrew Martin, wrote recent articles about the difficulties of paying back student loans as part of The New York Times’s series Degrees of Debt, which examines the implications of soaring college costs and the indebtedness of students and their families.

Mr. Lieber described how extraordinarily difficult it is for borrowers to expunge their student loans in bankruptcy court. As told through the story of a legally blind man in Ohio named Doug Wallace Jr., a borrower needs to convince a judge that his or her economic prospects are beyond hope.

“Do I think I’m hopeless?” Mr. Wallace said. “Well, yeah, I mean, by looking at it you would think I am hopeless. “

Mr. Martin detailed how the debt collection industry is cashing in on the rising number of borrowers who default on their student loans. Last year, for instance, the Department of Education paid more than $1.4 billion to private collection agencies and other groups to collect defaulted student loans.

“While the Department of Education debt collection contract has been one of the most highly sought-after contracts within the ARM industry for years, I believe it is now THE most sought-after contract within this industry, centered within the most sought-after market — student loans,” Mark Russell, a mergers and acquisitions specialist, wrote in InsideArm.com, an online publication for the debt collection industry, in October.

If you have a question about navigating student debt for the reporters or Mr. Walsh, leave it in the comments section below.

Article source: http://bucks.blogs.nytimes.com/2012/09/10/ask-about-navigating-student-debt/?partner=rss&emc=rss

DealBook Column: American Airlines and US Airways Dance Around a Merger

Tom Horton, chief of AMR, the parent of American Airlines.Nelson Ching/Bloomberg NewsTom Horton, chief of AMR, the parent of American Airlines.

It’s the ultimate cliché, but it is true: follow the money.

For the last several months, American Airlines’ new chairman and chief executive, Tom Horton, has been desperately trying to delay merger talks with his former cubicle mate, US Airways’ chief executive, Doug Parker. (Mr. Horton and Mr. Parker sat next to each other when they both worked at American in the 1980s.)

Mr. Horton put American’s parent, AMR, into Chapter 11 bankruptcy protection in November. Since then, US Airways has sought to merge with American to no avail — despite securing support for a deal from American’s own labor unions and many of its creditors.

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Virtually everyone in the industry believes that American, the third-largest airline in the country, and US Airways, the fourth-largest, will eventually have to merge to stand a chance of competing against United (which is the biggest and has merged with Continental) and Delta (which merged with Northwest). The question is when, not if.

“It’s not an option. It’s not an alternative. It’s inevitable,” Daniel Akins, a transportation analyst working for American’s flight attendant union, told a bankruptcy court in May. (What is less clear is whether a merger would be good for customers.)

Yet Mr. Horton hasn’t budged, beyond nodding to the overture by saying it will be considered as part of the company’s fiduciary duty to its creditors. Instead, he has repeatedly argued that the airline’s best strategic choice is to emerge from bankruptcy independently, declaring that he plans to restore American to its previous industry-leading position despite all the evidence that its market share is fast eroding.

But there potentially is another reason — one that would be a perverse incentive — that Mr. Horton may be shunning a deal with US Airways before emerging from bankruptcy: a giant payday.

Mr. Horton and his management team stand to receive somewhere between $300 million and $600 million if he can make it through bankruptcy court without merging first with a rival like US Airways.

In an odd twist of the bankruptcy process, airline management teams have typically managed to extract 5 percent to 10 percent of the company’s shares for themselves upon exiting Chapter 11, with the C.E.O. often getting 1 percent.

This happens, oddly enough, despite some of the same management wiping out shareholders (including themselves) by filing for Chapter 11 in the first place. AMR is expected to be valued at as much as $6 billion if it exits bankruptcy independently, analysts estimate.

Over the last several decades in the airline business, this is where C.E.O.’s have gotten rich.

Take a look at United’s bankruptcy back in 2005: Glenn Tilton, who was then the airline’s chief executive sought 15 percent of the company’s equity for management from creditors; after pushback from creditors, management lowered its request to 11 percent. After some back and forth, management was awarded 8 percent of the company. Mr. Tilton received a pay package worth nearly $40 million in new shares and other compensation in the company’s first year after emerging from bankruptcy.

A similar story played out when Northwest went through Chapter 11. Its former chief, Doug Steenland, received a package worth some $26.6 million in new shares when the company emerged from bankruptcy in 2007. Lest there be any question that compensation is clearly now on the minds of Mr. Horton and the rest of American’s management, just two weeks ago they inserted a special clause in the airline’s most recent tentative contract proposal with American’s pilot union preventing labor leaders from challenging any deal management plans to seek for itself in the bankruptcy process.

The contract reads: “APA agrees not to object to or contest the issuance of equity or other consideration in the bankruptcy cases to the company’s nonunion and management employees, in respect of the sacrifices made by them in furtherance of the company’s effort to restructure or as incentive for the nonunion and management employees’ future service to the company.”

That language is unusual, bankruptcy lawyers said. Advisers working for American, who did not want to be identified because the matter was confidential, said it was inserted because of the contentious relationship that the unions have long had with the company.

In a statement, American said, “This provision was specifically intended to give the union full transparency on plans for equity-based incentive compensation, which is a common form of compensation and aligns the interests of management and financial stakeholders. Any equity grants upon emergence would be subject to approval by multiple parties with a direct interest in the impact on value allocation. Any suggestion that management compensation would influence decisions about the best outcome for the company’s stakeholders is simply wrong.”

In fairness to Mr. Horton, the merger proposal by US Airways appears somewhat opportunistic and would be complicated. A deal to combine the carriers could be structured where American, not US Airways, was the acquiring company. These advisers have argued that American would be in a stronger position to negotiate a deal postbankruptcy.

The bankruptcy court has given American until the end of the year to come up with an independent reorganization plan, but the airline has also agreed to study its merger options. Mr. Parker of US Airways has sought to back American Airlines into a corner by offering huge, possibly unprofitable, concessions to American’s union workers, which are creditors in the bankruptcy process.

One critic of US Airways, William S. Swelbar, a research engineer in the Massachusetts Institute of Technology’s International Center for Air Transportation, wrote on his blog: “In its quest to acquire American Airlines, US Airways sounds like a teenager with its first credit card, spending money it doesn’t have.” Mr. Parker has been trying to engineer a merger for his company for years, repeatedly failing, notably losing a battle to merge with United. Mr. Swelbar said that Mr. Parker had “seduced some media and AA’s unions.”

It must also be noted that Mr. Horton has rejected two pay increases from American’s board and works without an employment contract. He is paid $660,000 annually while the company is in bankruptcy. Advisers close to the company say he is alert to the appearance of excessive compensation and may not seek an outsize compensation package upon exiting bankruptcy.

Still, given the logic of an American-US Airways tie-up — they are both the last independent hub-and-spoke players — it remains curious why they have not begun meaningful talks.

If you follow the money, you can see why Mr. Horton may want to avoid a deal, at least for now. On the other hand, if you follow the money, you can also see why Mr. Parker may want a deal. Surprise, surprise: there is a change-of-control provision in his employment contract that could kick-in if it is bought by another company and he is ultimately forced to leave. Depending on the structure of the deal, Mr. Parker could be paid more than $20 million.

Article source: http://dealbook.nytimes.com/2012/07/09/american-and-us-airways-dance-around-a-merger/?partner=rss&emc=rss

DealBook: MF Global Trustee Says Claims May Exceed $3 Billion

Louis J. Freeh, bankruptcy trustee for MF Global.Andrew Harrer/Bloomberg NewsLouis J. Freeh, bankruptcy trustee for MF Global.

The trustee overseeing the bankruptcy of MF Global estimates that creditors, including banks, big investors and service providers, could have more than $3 billion in claims against the failed company.

In his latest report to the bankruptcy court, the trustee, Louis J. Freeh, outlined his investigation of MF Global, which collapsed in October after misusing customer money.

In the 119-page document, Mr. Freeh, a former director of the Federal Bureau of Investigation, details that 112 claims could eventually be filed. While most of the claims are likely to occur in the United States, nearly $1 billion of them could stem from the operations in Britain, where MF Global had one of its largest units.

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“This report gets to the heart of the complex intercompany relationships inherent in a global firm that provided financing for its affiliates and subsidiaries all over the world,” Mr. Freeh said in a statement. “We believe this report provides increased transparency as to how the firm’s capital flowed through these entities and why we believe the Chapter 11 debtors have potential claims against affiliates in excess of $3 billion.”

The report came just hours after James W. Giddens, the trustee in charge of returning money to customers, laid out his own assessment of the bankruptcy in a 275-page report. Mr. Giddens also said he was considering potential civil claims against MF Global’s top executives, including the former chief executive, Jon S. Corzine.

The two trustees are feuding over a limited pool of money that remains available to MF Global. Their missions are at odds. Mr. Freeh must return money to creditors, while Mr. Giddens is responsible for making customers whole. Farmers, ranchers and hedge funds are still missing a third of their money, as Mr. Giddens tries to recover more than $1 billion of customers assets.

In his report, Mr. Freeh took a swipe at Mr. Giddens. While Mr. Freeh expressed optimism that MF Global customers would receive all of their money, he indicated that clients might not be at the head of the creditor’s line should there be a shortfall in customer money.

In the report issued by Mr. Giddens on Monday, the trustee said that Mr. Freeh’s potential claims against MF Global’s brokerage unit would not “appear to have any priority over customer claims.”

Article source: http://dealbook.nytimes.com/2012/06/05/mf-global-trustee-estimates-3-billion-in-claims/?partner=rss&emc=rss

In Alabama, a Test of the ‘Full Faith and Credit’ Pledge to Repay Bonds

This safe debt, called a general-obligation bond, is said to be the next strongest thing to Treasuries because it is backed by a “full faith and credit” pledge. That means the government that issued it will pay it on time, no matter what.

But now Jefferson County, Ala., has stopped paying such debt, breaking with convention and setting up a fundamental test of what full faith and credit truly means.

“We all want to know, ‘What’s the truth here?’ ” said Richard A. Ciccarone, chief research officer at McDonnell Investment Management. “The way I learned it, full faith and credit was considered all the taxing power of a community, and that means there’s an infinite pledge. When you get into bankruptcy court, truth is something that can be revealed in a new way.”

Jefferson County filed the biggest Chapter 9 bankruptcy in United States history last month, raising new uncertainty about the safest municipal bonds. Court precedent offers few answers. Municipal bankruptcies are rare, and most have involved tiny, special-purpose districts that did not even have general-obligation bonds, having issued revenue bonds, which are considered riskier because they guarantee repayment solely from money generated by a specific project like a toll road.

The few places that have gone bankrupt with general obligations outstanding have sent reassuring signals, making payments even though they were not required to in bankruptcy. Orange County, Calif., the previous Chapter 9 record-holder, took a few extra months to pay some maturing debt, but it compensated investors for the delay by giving them almost a full percentage point more interest than it otherwise owed them.

The small city of Central Falls, R.I., has been duly paying its general-obligation debtholders in Chapter 9 this year, bolstered by a new state law giving those investors priority over everybody else.

Jefferson County, by contrast, is taking advantage of the automatic stay granted in bankruptcy, which bars creditors from demanding payments or grabbing collateral. Officials say they stopped sending cash to the county’s paying agent in November and will not send any money this month, either.

Bankruptcy experts have long known that in theory a municipality could use the stay to revoke its full faith and credit pledge, but they have not watched a big distressed city or county go through with it. “You’ve got a case here where the rubber has hit the road,” said Kenneth N. Klee, a bankruptcy lawyer representing Jefferson County, whose debt grew out of poorly conceived efforts to finance a court-ordered rebuilding of its sewer system.

The county’s nonpayment is not its only surprise. Like many places, it used newfangled instruments to circumvent constitutional limits on how much debt it could legally issue. In Alabama, counties are required to hold a referendum before issuing any general-obligation bonds. So Jefferson County has not issued such bonds since the 1950s. Instead, it issues warrants, which look nearly identical but do not require the referendum.

Official disclosures promote the county’s warrants as “general obligations,” toward which “its full faith and credit have been irrevocably pledged.” Sounds good, but what does it really mean? Conventional wisdom has it that if a government defaults on a general obligation, its creditors can take it to court, where the judge will order it to raise taxes — as much as it takes, no matter how painful.

But that now appears to be a hollow threat in Jefferson County. Counties in Alabama do not have the legal authority to raise taxes. Only the state can do that.

“There’s a lot of uncertainty, generally, about what full faith and credit means,” said David A. Skeel Jr., a law professor at the University of Pennsylvania. “There’s a whole debate about whether these obligations are ever enforceable. And this is even apart from the weird situation you’re referring to, where the county is pledging its full faith and credit but doesn’t really have the ability to do that.”

Kyle Whitmire contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=a74aeca6ee9541119549b6ce477f639c

Pension Deal in Rhode Island Could Set a Trend

If approved by the bankruptcy court, the agreement could be groundbreaking, said Matthew J. McGowan, the lawyer representing the retirees.

“This is the first time there’s been an agreement of the police and firefighters of any city or town to take the cut,” he said, referring to those already retired, who are typically spared when union contracts change. “I’ve told these guys they’re like the canary in the coal mine. I know that there are other places watching this.”

As cities, towns and counties struggle with fiscal pain, there has been speculation that they could shed their pension obligations in bankruptcy. Some have said it might, in fact, be easier for local governments to drop those obligations than it is for companies, which use a different chapter of the bankruptcy code. Large steel companies, airlines and auto suppliers like Delphi have terminated pension plans in bankruptcy.

“But it’s a fight that municipalities haven’t been willing to fight,” said David Skeel, a law professor at the University of Pennsylvania who writes frequently on bankruptcy.

Municipalities have been reluctant because public pensions are protected by statutes and constitutional provisions meant to make them nearly airtight. And even if the rules could be broken in bankruptcy, that would present a different problem. Local officials who want to cut pensions do not, as a rule, want to shortchange their bondholders for fear of not being able to borrow in the future — yet bankruptcy law requires that both types of creditors be treated equitably.

Rhode Island sought to sidestep the issue with a law that gave bondholders more protections than retirees. Central Falls’s retirees used that issue to gain some bargaining power, extracting a commitment from the state to seek extra money for the next five years. The extra money is not a sure thing, though, and would not cover all the cuts to the retirees over those years.

The last American city to work its way through Chapter 9 bankruptcy was Vallejo, Calif., which finished the process this year. It had to navigate similar stumbling blocks. Initially, it planned to cut its workers’ and retirees’ pensions, but it changed course when California’s giant state pension system, which administered Vallejo’s plan, threatened a costly and debilitating court battle.

Vallejo instead cut pay, health care and other benefits, as well as city services and payments to its bondholders, and left the pensions intact. Even though the bondholders faced a loss, all parties eventually agreed they had been treated equitably, and the state passed a law making it easier for Vallejo to continue borrowing.

The episode strengthened the perception that public retirement plans were unalterable, even in bankruptcy.

“Central Falls is undermining that,” said Mr. Skeel, who wrote about Vallejo’s bankruptcy for a coming issue of The University of Chicago Law Review.

Central Falls had little choice. For years, its government failed to contribute enough to its police and firefighters’ pension fund, and the fund effectively ran out of money this fall. The city, which had also promised the retirees comprehensive health benefits, could not cover the pension and health payments out of its general revenue.

The police and firefighters have known for months that drastic cuts were looming. Last month, the unions representing active workers negotiated new contracts, which called for workers to complete at least 25 years to receive pensions, instead of 20. Workers will also have to meet much more rigorous standards to qualify for disability pensions.

Until now, 60 percent of Central Falls police officers and firefighters have retired on full disability pensions, drawing the inflation-protected and tax-free payments even when they embarked on new careers. One of them, at 43, has become a prominent personal-injury lawyer and can be seen in television ads shooting baskets and pretending to fall down a manhole. That retiree, Robert Levine, a former police officer, said his disability was the result of an on-duty car crash where he was not at fault, and that his pension had been granted lawfully after his condition was certified by three different doctors.

The retirees, who are not represented by the unions, voted in favor of their pension reductions last week. The cuts would be up to 55 percent of each retiree’s benefits, which now vary widely, from about $4,000 to $46,000 a year, depending on final salary, years of service and other factors. A few retirees would give up more than $25,000 a year. Central Falls’s police and firefighters do not participate in Social Security.

Article source: http://feeds.nytimes.com/click.phdo?i=196c2d963e877499e4c49bbde9b3c159

Solyndra Gets New Leader in Bankruptcy

A bankruptcy court on Thursday approved the hiring of a chief restructuring officer at the California energy company Solyndra. R. Todd Neilson, who served as the bankruptcy trustee for the boxer Mike Tyson and the rap impresario Suge Knight, will now lead Solyndra as it struggles to emerge from bankruptcy.

The company president, Brian Harrison, who appeared before a House subcommittee on Sept. 23 but invoked the Fifth Amendment, resigned on Oct. 7, according to a court filing. Mr. Neilson is a director of Berkeley Research Group, based in Los Angeles.

Article source: http://feeds.nytimes.com/click.phdo?i=34d3edb61f37112be5b1f33a6541a3c7

Alabama County Averts Bankruptcy

The terms of the agreement call for Jefferson County, which includes the city of Birmingham, to shed about $1 billion of the debt, the majority of which is held by J.P. Morgan. The agreement also offers the county several tools to lower its interest rate on the roughly $2 billion of new debt that will be issued to replace the current warrants.

“It’s been an agonizing process; it’s been going on for three and a half years,” said one Jefferson County commissioner, Joe Knight, explaining why he voted in favor of the agreement. “Today we’re going to take a step. It’s time for a resolution of this lingering debacle.”

Mr. Knight and others on the five-member commission said they were pleased that the framework agreement called for the governor to call a special session of the state legislature this fall, where lawmakers would look for ways to help Jefferson County close a $40 million budget gap. The deficit became apparent over the summer as the commission struggled to with what to do about its giant debt, infuriating residents of the county.

Until this year, state officials had refused to help the county straighten out its finances, saying it had made its own problems and should solve them on its own.

County Commissioner Sandra Little Brown said that since the state had finally offered some help, “it would really be a slap in the face to the governor and the legislature” not to give the agreement in principle a chance. She noted that the agreement gives the county a chance to file for Chapter 9 bankruptcy court protection if the state’s efforts to help prove fruitless.

Jefferson County’s debt grew out of a flawed effort to refinance bonds it sold years ago to raise money for court-ordered sewer improvements. Chapter 9 became something of a battle cry in the county, as previous restructuring talks yielded proposals that included big increases in sewer rates. The current agreement-in-principle also calls for sewer rate increases, but smaller ones than in the past.

The one commissioner to vote against the agreement, George F. Bowman, read part of a letter he received from a county resident who urged him “not to accept the extraordinarily damaging terms,” particularly annual rate increases that could go on for as long as 40 years.

Article source: http://feeds.nytimes.com/click.phdo?i=b868cd1e47da2df7ae4a141e404b90a0