County Avoids Bond Default, but More Due : Bankruptcy: The $175-million payoff of one set of debts leaves $800 million worth looming. Credit agency blasts rollover.

As expected, Orange County paid off $175 million of its debt Friday, averting a default on its first set of summer bond payments.

Using proceeds from Tuesday’s sale of $155 million of so-called Teeter bonds along with bond funds held in reserve, the county was able to repay investors who held $175 million of outstanding Teeter bonds due June 30.

“These investors are obviously overjoyed to get out of the county’s bankruptcy case. They’re out; they’re gone,” said Ursula Hyman, who represents bondholders in the bankruptcy.

The Teeter bonds, backed by delinquent property taxes the county expects to receive down the road, were sold by the county Tuesday, the same day that voters rejected a proposed half-cent sales tax increase designed to help the county pay off its debt.

But even with the Teeter bonds paid off, $800 million of debt payments still looms. A credit rating agency warned Friday that the county will be in default if it goes through with its proposal to extend the debt for one year.

“The county has not identified any potential revenue streams to repay the debt next year,” said Moody’s Investors Service in a report explaining why the extension is a default. On Wednesday, Standard & Poor’s Corp. also said the one-year rollover is the same thing as a default because the county has not said how it will pay back investors.

The county owes noteholders $600 million on July 10 and the rest on July 19 and Aug. 10.

This week in New York, noteholders discussed whether to accept the proposed rollover. If noteholders reject the proposal, the bonds would be in default. Noteholders then would attempt to claim an estimated $500 million in bond reserve funds held by the county. The noteholders have until next Friday to decide.