In yet another move signaling to the market that declaring bankruptcy is a real possibility for both it and municipalities across the United States, Jefferson County officials have rejected a debt deal that rules out the option to file for bankruptcy protection.
As Bloomberg outlines in “Jefferson County Won’t Accept Debt Deal That Rules Out Bankruptcy Filing,” Commission President David Carrington points out that Jefferson County, Alabama “wants the option open because the county hasn’t shored up its general fund after a court struck down a wage tax.”
In short, Carrington maintains that “‘if a condition (of a deal) is (that) we agree to not file Chapter 9, that’s a nonstarter.'”
In short, Jefferson County is telling the markets: “We want the ‘option’ to file Chapter 9.” Which, of course, means: “we will, most likely in the future, entertain the right to exercise this option.”
Municipalities across the United States are hurting. And while Jefferson County is an obvious (yet oft-ignored) bellwether to the markets that a raft of municipality bankruptcy filings is, indeed, on the horizon, Wall Street would do well to pay attention to what’s transpiring on Main Street.
Margaret Bogenrief is a Partner with ACM Partners, a boutique crisis management and distressed investing firm serving companies and municipalities in financial distress. She can be reached at [email protected]