ORANGE COUNTY IN BANKRUPTCY : Credit Agency Questions Fiscal Plan : Bankruptcy: Moody’s says the recovery blueprint does not prevent Orange County from defaulting on its bonds, even if all elements come through.

A major credit rating agency criticized the county’s fiscal recovery plan in a report Friday that said the plan would not prevent the county from defaulting on its bonds and includes no solid alternatives if parts fall through.

“Even if all of the elements of the announced recovery plan are put into place as expeditiously as possible, it appears impossible for the county to make full and timely debt service payments this summer,” the 10-page report by Moody’s Investors Service said.

To avoid a costly default, which could deny the county access to the bond markets for years to come, the county also must either negotiate with bond holders willing to defer their debt payments on $1.275 billion in bonds that come due this summer or get a bridge loan from the state, the report said.

“This is a great long-term plan, but what about the short term? How do you take care of note holders who need their money this summer?” said Karen Krop, assistant vice president of the investors service. “The plan doesn’t say how they will take care of them in just a few months when the notes come due.”

One of the county’s major bond holders agreed with the Moody’s report and was increasingly concerned about whether it would lose money on Orange County investments.

“This is what appears to be true. Moody’s is right,” said William P. Kovacs a vice president with Kemper Financial Services in Chicago, which owns $200 million of Orange County bonds. “But we’re willing to be practical and we continue to meet with the county. We’re just hoping the state will help.”

Orange County officials could not be reached for comment on Friday.

The critical components of the recovery plan, designed to help cover losses suffered by agencies that invested in the county’s investment pool, would call for the sale of $234 million in recovery notes, $150 million in property tax-related bonds, and more than $1 billion in bonds backed by garbage fees and motor vehicle license fees.

Moody’s was especially critical of an alternative being considered by the county that would redirect revenue from the Measure M sales tax, which voters approved for transportation needs. Redirecting this money, which is pledged to secure bonds sold by the Orange County Transportation Authority, would “violate that authority’s bond indentures” and would have “severe negative consequences” for the authority’s bond rating.

“I think they’ve described the problems accurately,” said Stan Oftelie, chief executive officer of the OCTA. “The more we look into it the less practical and attractive it seems. It just doesn’t make sense.”

Oftelie said the OCTA, which has double-A rated bonds, wants to keep its high bond rating so it can borrow money for streets, roads and freeways more cheaply.