Municipal Bond Forum
Jefferson County is in bankruptcy, not the state
Q
Why are Alabama’s bonds rated “AA” when Jefferson County is in bankruptcy and the bonds are worthless? It sure makes bond buyers reluctant to buy, or rely on the rating system. I’m a million-dollar muni bondholder.
A
James A. Klotz responds:
The state of Alabama is rated in the “AA” category by both Moody’s and S&P because state’s obligations are very well secured.
It is Jefferson County, not the state of Alabama, that filed for bankruptcy.
There are, however, certain Jefferson County bonds that are backed by bond insurer Assured Guaranty Municipal Corp. (AGM) that also enjoy an “AA” rating.
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