O.C. IN BANKRUPTCY : O.C. Can Retain Critical BofA Services : Courts: Bankruptcy judge says county can keep prior arrangement, including $200-million line of credit and agreement that will help it make good on payroll Friday.
Orange County received court approval Wednesday to maintain vital banking services from Bank of America, including a $200-million credit line and an agreement that will enable the county to make its $16.4-million payroll Friday.
The decision by U.S. Bankruptcy Judge John E. Ryan allows Orange County to enjoy the same banking services it did before it filed for bankruptcy Dec. 6, providing some measure of stability as it focuses on solving its financial crisis, attorneys for the county said.
Ryan’s decision came after the county and the San Francisco-based bank made an emergency joint request, just two days before payroll checks to county and school employees were due to be issued. Without Ryan’s approval, county officials would have been hard-pressed to make this week’s payroll on time, possibly having to hand-write checks.
“It would have been a mess,” said county bankruptcy attorney Lee Bogdanoff. “We have been using this (automated payroll) system for a long time and it made sense to keep using it.”
Although the ruling will help the county with day-to-day operating needs, the bank, which is also an underwriter and trustee for various county bond issues, has not yet offered any additional credit. County sources had indicated that Bank of America was considering other means to help the county, but attorneys for the bank Wednesday declined comment about any such plans.
Wednesday’s ruling was made on an interim basis by Ryan, who will revisit the matter at a Jan. 4 hearing. None of the dozen or so attorneys in the court, some of whom represented investors in the county’s troubled portfolio, voiced objections.
“It appears to me that this petition is in the best interests of the debtor (Orange County), that it was brought in good faith, and that the debtor would suffer irreparable harm if the court didn’t approve the motion,” Ryan said.
County officials and attorneys for the bank told Ryan in court and in court papers that maintaining banking services was critical to allowing the county to run at least some of its operations smoothly in the midst of the financial crisis.
“If these facilities cannot be continued with the bank, the consequences could be disastrous,” said the county’s acting treasurer, Matthew Raabe.
Attorneys for the bank, which has had a longstanding relationship with the county, said the bank is not seeking any advantages, such as extra collateral or a release from potential suits.
“The bank wants to help out the county so it can focus on the larger issues of this case,” said Bank of America attorney Theodore C. Albert. “We are acting in good faith.”
Ryan also approved an existing agreement that allows the public to pay certain county fines and fees by credit card that can add up to tens of thousands of dollars daily, according to court documents.
The agreement about banking services is virtually the same as the one that existed before the bankruptcy, but the bank took the precaution of adding a condition that it can pull out of the arrangement at the end of the bankruptcy process.
The bank could also terminate the relationship with the county if the county were to give a higher priority to paying its debts to another creditor, said Bank of America attorney Harold Lichterman.
As before, all debts incurred by the county in using the bank’s services and credit line would be due on the same day, Lichterman explained to Ryan, so a termination of the agreement would not leave the county with more than a day’s worth of debts.
