O.C., Creditors Narrow Focus in New Draft of Debt Rollover Agreement

Lawyers for Orange County and its creditors spent Saturday rewriting a proposal to extend for one year some $1 billion in short-term debt, chopping out provisions that would have benefited employees, vendors, and long-term bond holders but had irked U.S. Bankruptcy Judge John E. Ryan.

The creditors’ committee is scheduled to vote on the new rollover agreement Monday morning and Ryan will consider it at a hearing Tuesday.

“At the end of the day, this agreement is going to be approved,” said Robert J. Moore, attorney for the creditors. “With these changes, it’s scripted to meet [Ryan’s] concerns.”

The judge dealt a blow to the complex, carefully negotiated deal during a hearing Friday in which he said he was uncomfortable with the widespread benefits being granted to parties other than short-term note holders. He said he would reject the proposal if forced to rule on it as one complete package.

The new deal focuses only on five note issuances coming due this summer. Note holders are asked to extend the maturities until June 30, 1996; in exchange, they would receive 95 cents extra interest for every $100 invested, and a promise that the county will not try later to declare the debt invalid.

If Ryan approves the deal, individual noteholders have until July 7 to vote whether to accept it.

Lawyers for vendors and employees may yet contest the new deal, although the bulk of the 12 objections filed against the previous proposal have been resolved.

Investors in the county’s failed investment pool might also continue to fight the rollover because they oppose any debt validation, which remains part of the new agreement.

But county bankruptcy attorney Bruce Bennett expressed confidence Saturday that the rollover will occur, enabling the county to avoid a default.

“I think we will get there by Tuesday,” he said. “I don’t think there are any more objections that can’t be resolved.”