ORANGE COUNTY IN BANKRUPTCY : Anaheim Gets Line of Credit to Pay Debt

After a day of uncertainty that involved final negotiations with a Japanese bank and a hearing in U.S. Bankruptcy Court, city officials announced Friday that they will pay part of a $99.5-million debt due next week by tapping into a line of credit.

City officials simultaneously requested a $75-million line of credit from Industrial Bank of Japan and a $29-million emergency cash disbursement in bankruptcy court.

Both methods of financing came through Friday, which wasn’t necessarily good news for Anaheim.

The $29-million disbursement was contingent on the city not getting the credit line. The $75-million line of credit was extended by the bank late Friday afternoon, after the bankruptcy court ruling.

That was actually a mixed blessing for the city, which would have preferred to pay its debt with its own interest-free money from the county’s bankrupt investment pool. The city will have to pay a 30-day interest rate of 6.17% on money it borrows from the bank.

The city’s looming debt stems from the $95 million Anaheim borrowed in March, 1994, to invest in Orange County’s investment pool, which collapsed late last year.

Anaheim had $169 million invested in the pool, approximately 20% of the city’s $874-million investment portfolio.

The loan must be paid back with interest to Deposit Trust Corp. in New York by Tuesday. Anaheim spokesman Brett Colson said the city intends to make the payment on Monday.

“There is now absolutely no danger of Anaheim defaulting on its payment,” Colson said. “At this point, we are still trying to figure out exactly how much of the credit line we will need to use.”

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In U.S. Bankruptcy Court Friday morning, Judge John E. Ryan had agreed to give Anaheim the $29 million if it did not secure the line of credit by the end of the day.

Lewis Rosenbloom, a lawyer representing Anaheim, noted that on Dec. 1, five days before the county declared bankruptcy, the city received assurances from county officials that money to make the debt payment had been set aside.

Rosenbloom described those assurances as “shallow and hollow” and stressed that “the city is acting responsibly.”

Ryan asked Rosenbloom twice if Anaheim had any other means of paying the debt short of seeking emergency funds.

Rosenbloom responded that while the city was still negotiating Friday for a line of credit, there was no telling if a deal would be reached by the Monday deadline.

“We believe a hardship has been established,” Rosenbloom said.

Earlier in the hearing, an attorney for the county had contended in court that Anaheim was seeking emergency funds simply because it amounted to a better deal than the line of credit officials were negotiating.