NEW YORK TIMES: …The refinancing agreement covers debt held by creditors that include JPMorgan Chase, which holds about $1.22 billion of the sewer debt, the biggest block; three bond insurers; and seven hedge funds, according to a term sheet circulated in a meeting of the county commission on Tuesday…
The terms call for these creditors to receive about $1.84 billion for the $2.4 billion of debt they now hold. The concessions were weighted most heavily toward JPMorgan, the term sheet said, “to increase the recovery of other sewer creditors.”…
In addition, the Bank of New York Mellon, as trustee for small creditors, has asked Judge Bennett for a full independent review of the sewer system’s finances, as well as what it has called “poor planning, gross incompetence, waste, graft, corruption or fraud in connection with the construction, repair or rehabilitation” of the sewer system since 1997… (more)
EDITOR: Here we have Gov. Tom Corbett’s worst nightmare. If the Harrisburg insolvency is allowed to be resolved by the federal bankruptcy court, the creditors will have to accept a significant ‘cram down’ which means they will not show gratitude to Corbett in the form of campaign contributions towards his 2014 campaign. Nor will there be lucrative refinancing, another ‘feeding trough’ for bankers, lawyers and consultants, and a further source of campaign contributions from the beneficiaries.
Perhaps then the Lancaster Waste Authority could purchase the incinerator at the original market price of $45 million, rather than three times its worth, taking care not to acquire the environmental challenged ‘Mt. Ashmore.’
“Despite those concessions, residents of Jefferson County have still often complained that they were treated inequitably because several of their elected officials went to prison as a result of the refinancing, while no one from the bank was convicted of a crime. They have railed in particular against the possibility that their sewer rates would go up to allow the county to pay sewer debt that many now see as illegitimate.”
Bring on the bankruptcies! I’m tired of hearing terms like “too big to fail” to justify the bailouts of professional money managers. That is their business – to assess risk and structure financing responsibly. If they cannot perform that task then let them be fired so they can move on to a career they understand.