ORANGE COUNTY IN BANKRUPTCY : Asking for Help : Advisers: Orange County turns to a New York firm for expertise in handling its imperiled fund. The holdings may be sold piecemeal.

From the pink-walled offices of a building adjacent to Grand Central Station, two women who helped pioneer the use of the complex investments known as derivatives--which ultimately helped force Orange County into bankruptcy--are frantically attempting to unwind problems in the county’s troubled portfolio.

“It’s like a tornado rocked through here,” an exhausted Leslie Lynn Rahl said Wednesday afternoon, a day after her latest client became the largest local government in U.S. history to file for bankruptcy.

Rahl, 44, and her partner, Tanya Styblo Beder, 39, formed Capital Market Risk Advisors Inc. in July to help clients work out problems stemming from risky investments gone sour.

Now, the fledgling firm faces an unenviable assignment: helping Orange County salvage as much as possible of its investment portfolio, which has lost $1.5 billion or more in value this year.

“If anyone can do this--it’s these two women,” said Grover McKean, a senior vice president with Lazard Freres & Co. in Los Angeles, the investment banking firm that helped devise a rescue plan for New York City in the mid-1970s and is putting together a proposal for advising Orange County. “They really know their stuff.”

Rahl and Beder are considered experts in risk management. Their company typically advises banks, mutual funds and large corporations on how to avoid or control losses from derivatives--investment contracts that derive their value from an underlying stock or index linked to such things as interest rates, commodities or foreign currencies.

Determining the exact current value of Orange County’s troubled investment pool--most recently estimated to be worth $18.5 billion, down from $20 billion on Jan. 1--and the status of particular bonds in the pool will be Capital Market’s first priority, according to sources close to the company.

The firm would not disclose the portfolio’s current value or detail specific strategies to be taken in its bankruptcy workout proposal. But sources close to the situation say the Capital Market plan probably will involve a systematic liquidation of the bond portfolio. The county would sell individual assets from the pool over the next few months, rather than attempt to find one or more buyers for the entire investment portfolio.

“Their options after such a large county bankruptcy are rather limited,” said Robert Lamb, a public finance professor at New York University’s Stern Business School. “They will have to help the county operate under bankruptcy and determine what bond repayments are scheduled and the potential to make those payments.”

Lamb cautioned against hurriedly liquidating the county’s assets; selling the county’s bonds all at once, he said, could get “the worst price.” Capital Market should determine which of the portfolio’s bond assets are the healthiest, he said, and sell those, using the proceeds to pay the school districts and other participating agencies that will need to make regular withdrawals from the fund to finance their operations.

Robert J. Schwartz, chairman of the International Assn. of Financial Engineers in New York, said Rahl and Beder are experts in tracking down the value of each derivative transaction in a troubled investment pool and then making recommendations on how to proceed, having advised large mutual funds and other institutions.

“They are very good at valuing the securities down to the last penny,” he said.

Rahl, who has a bachelor’s degree in computer science and an MBA from the Massachusetts Institute of Technology, established Citibank’s risk management department in 1983 and started her own firm seven years later. Beder, a product of Yale University and of Harvard University’s graduate business school, calls herself a “founder” of the derivatives market. She began her career in 1977 with the investment banking firm CS First Boston, eventually becoming that firm’s derivatives specialist.

It was CS First Boston’s moves Tuesday to seize collateral from Orange County’s pool that triggered the bankruptcy filing.

In July, Beder told a congressional hearing on derivatives that although “derivatives play a valuable role in the market,” every user of the product should have “specific, written policies regarding their use.”

Both partners said derivatives are not to blame for losses suffered by Orange County. They say it is the way derivatives are used and monitored that creates problems.

Echoing Federal Reserve Board Chairman Alan Greenspan and others, they suggest that prudent steps be followed, such as clear policies when using derivatives, a real understanding of the structure of the complex deals and making sure the securities are properly valued.