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Creditors Seek Dismissal of Jefferson County Bankruptcy

Bank of New York Mellon Corp., as the indenture trustee for holders of the county’s sewer warrants, asked U.S. Bankruptcy Judge Thomas B. Bennett in Birmingham, Alabama, to throw the biggest U.S. municipal bankruptcy out of court, where the county is protected from creditors.

Bank of New York Mellon argues that Jefferson County wasn’t authorized to file for bankruptcy because, under Alabama law, only counties, cities and towns that have issued funding or refunding bonds are eligible for Chapter 9 municipal restructuring. The county has only warrants, which are distinguished from bonds under Alabama law, the bank said in yesterday’s filing.

Jefferson County creditors including JP Morgan Chase Bank NA, which owns more than $1 billion of the sewer warrants, Bank of America NA and Assured Guaranty Municipal Corp. filed court papers supporting BNY Mellon’s request for dismissal.