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Source: Reuters

INTERVIEW-UPDATE 1-Alabama gov.:county bankruptcy an option

Published: 15 Feb 2011 06:39:19 PST

* Jefferson County faces multibillion debt

* County creditors must make concesssions-governor

* Governor says wants debt saga resolved in one year

MONTGOMERY, Ala., Feb 14 - Alabama's Jefferson County should strongly consider declaring itself bankrupt if creditors fail to make concessions over a multibillion dollar debt, the state's new governor said on Monday.

The county has struggled since 2008 to restructure its debt of at least $3.2 billion and avoid what would be the largest municipal bankruptcy in U.S. history.

Jefferson County's debt situation needs to be resolved within one year, said Gov. Robert Bentley, who took office in January.

He said bankruptcy was the "greatest gift" to local governments in financial trouble and would be a viable option.

"There's going to have to be some concession on the amount of debt in order to solve this. Now can that be done without bankruptcy? Hopefully. If it can not be done without bankruptcy then I think that Jefferson County probably will declare Chapter 9 bankruptcy," Bentley told Reuters in an interview.

"That is probably the greatest gift given to counties and cities by the federal government. It was instituted by the federal government in about 1933 and it was for the protection of cities and counties that were going through difficult times like this," he said.

Jefferson County, which includes the state's largest city, Birmingham, is the economic driver of the state but it was much harder to recruit investment with the debt situation hanging over its head, he said.

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