ORANGE COUNTY IN BANKRUPTCY : Key Element of Filing May Be in Jeopardy : Regulations: Some experts say bankruptcy statute may not bar banks and brokerages from liquidating their collateral, as at least one has already done. But others disagree.

A key element of Orange County’s apparent strategy in filing for Chapter 9 bankruptcy protection may be in jeopardy, as some experts believe that the federal statute may not bar the banks and brokerages that loaned the county fund $12 billion from liquidating bonds held as collateral--which could force the county to realize losses on those bonds.

Hugh Ray, a partner with the firm of Andrews & Kurth in Houston and chairman of the American Bar Assn.’s business bankruptcy committee, said Wednesday that although it is “a close call” legally, he believes that the lenders are free to sell the collateral.

“Does the filing accomplish what they’re trying to accomplish--get a stay on the assets? It may not,” said David Kupetz, a bankruptcy lawyer with the Los Angeles firm of Sulmeyer, Kupetz & Bauman.

Other lawyers disagree and think that the bankruptcy filing protects the county’s collateral.

CS First Boston Corp., one of several brokerages that loaned the county money to buy securities, seized $2 billion worth of collateral--government bonds--Tuesday and sold it, helping to precipitate the bankruptcy filing.

On Wednesday, Nomura Securities was said to have attempted to sell about $500 million in county-owned bonds it held as collateral.

Elsewhere, Bank of America acknowledged that it was one of Orange County’s lenders, but “we haven’t sold any collateral,” spokesman Cary Walker said.

Brokerage Smith Barney, which has $800 million in credit outstanding to the county fund, said it is not now contemplating liquidating bonds held as collateral.

But the firm also issued a statement: “We believe that the automatic stay under Chapter 9 of the bankruptcy code does not apply” to its loan--a warning that the firm believes it has the right to liquidate its position.

Chapter 9 of the U.S. Bankruptcy Code, the section governing municipal bankruptcies, has a general provision--the “automatic stay” that Smith Barney referred to--prohibiting creditors from enforcing their claims against a municipality that has filed bankruptcy.

But Kupetz and Ray said the chapter contains an exemption for repurchase agreements--the type of short-term borrowing Orange County used in its fund.

Ray said the exemption is not as clear-cut as one in Chapter 11, which deals with corporate bankruptcy. He said that because of a “glitch,” Congress, in revising the code in 1984, failed to include the same exemption in Chapter 9.

But Marc Beilinson, a lawyer with Pachulski, Stang & Ziehl in Los Angeles, said the congressional glitch theory might not impress a “strict constructionist” such as Judge John E. Ryan, who will handle the Orange County case. Beilinson said that Ryan might decide that if Congress had meant for Chapter 9 to have the same exemption as Chapter 11, it would have put it there.