ORANGE COUNTY IN BANKRUPTCY : BOND TICKER : Ability to Repay Debt Doubted

Amajor Wall Street bond-rating agency said Wednesday that Orange County is unlikely to meet payments on $1 billion in notes due this summer because its bankruptcy recovery plan depends on too many outside conditions.

“The likelihood of Orange County paying its short-term debt obligations on time this summer is remote,” said Jane Eddy, a senior analyst with Standard & Poor’s Corp.

The county’s recovery plan depends on state lawmakers passing legislation. It also depends on the passage of Measure R, the proposed half-cent sales tax increase on a June 27 ballot. The tax increase would raise about $135 million annually for 10 years. The county would use the revenue to back about $700 million in new borrowing.

S & P noted that the recovery plan relies on proceeds from a lawsuit filed by the county against Merrill Lynch & Co., which the county accuses of selling risky securities in violation of the law. The brokerage house has denied any wrongdoing.

S & P also expressed concerns that the county doesn’t have any backup plan under consideration if the current measures aren’t approved.

S & P and other bond-rating agencies have been criticized for giving high ratings to debt sold by the county last year, even as the investment pool was losing its value.

Fountain Valley Wants Parkland for Frozen Funds

Fountain Valley officials have suggested taking over a portion of the county’s Mile Square Park as part of a deal to reimburse the city for some of the money the county has frozen in its collapsed investment pool.

City Manager Ray Kromer recently suggested such an exchange to county officials, who gave the idea a “very cold reception,” he said.

Nonetheless, city officials said they will continue to pursue the idea.

The city is especially interested in receiving about 25 acres of undeveloped parkland next to the Fountain Valley Recreation and Cultural Center.

Communications Contract Dispute Won’t End Soon

Ericsson Inc.’s long dispute over Orange County’s award of an $82-million emergency communications system contract to rival Motorola won’t be ending any time soon.

As Ericsson Inc. prepared Wednesday to ask a Superior Court judge to temporarily block the county from awarding the contract, county lawyers got the matter referred to Bankruptcy Court, where it will join the other lawsuits against the county.

John Amsden, an attorney with Howrie & Simon, the law firm handling the county’s $2-billion lawsuit against Merrill Lynch, told the court that Ericsson’s original claim was filed before the county’s bankruptcy petition in December, so Bankruptcy Court has jurisdiction.

An outraged spokesman for Ericsson called the removal “another ploy to delay” the case “by putting it into the black hole of the Bankruptcy Court.”

Ericsson contends the county improperly awarded the bid to Motorola after a review by a consultant with an alleged conflict of interest and even though Motorola’s contract will cost the county $15 million more. The county and Motorola deny the claims.

Compiled by Shelby Grad, with Michael G. Wagner and the Bloomberg News Service.