Three Orange County business leaders toured Wall Street on Monday, hoping to lift the bankrupt county's sagging image among bond-rating agencies and members of New York's financial community.
Though the businessmen said they were encouraged by the reception they received, their influential hosts cautioned that Orange County's tarnished reputation probably won't be healed until well after the bankruptcy is resolved.
The volunteer ambassadors--leaders of the Orange County Business Council--said their aim was to boost Wall Street's confidence in the county's bankruptcy recovery plan and to convince analysts that the local economy remains strong despite the county government's financial troubles.
"It was a very good day," said Wayne Wedin, chairman of the council. "They indicated to us that we're making a good deal of progress and that they're appreciative of the recovery plan."
The mission of the trip "was to make sure they understood how committed we are to the resolution" of the bankruptcy, said Wedin, who was accompanied by Gary Hunt, executive vice president of the Irvine Co., and Roger Embrey, general manager of Southern California Gas Co.
Bond-rating officials applauded their visitors' efforts, but said that the blessings of Orange County business leaders would have little impact on the county's abysmal debt ratings.
The meeting "was helpful," said Barbara Flickinger, assistant director at Moody's Investors Service Inc., a leading bond-rating agency. "But we have to base our conclusions on what the county itself presents, not what other people say about it."
Flickinger said Moody's probably won't review its rating of Orange County's debt until the reorganization plan is completed and approved in Bankruptcy Court, which may not happen until spring.
In the meantime, Moody's will continue to rate the county's debt at Caa, one notch above the lowest possible rating. That means the agency considers bonds issued by Orange County about as safe as junk bonds.
Such a negative rating could cost the county millions of dollars when it tries to sell bonds in the future, because it will have to pay higher interest rates to entice investors nervous that the county might again default.
Analysts at Fitch Investors Service said they appreciate the dedication of Orange County's business leaders in chipping in to sort out the county government's tangled finances. But they said that until several thorny issues still hovering over the bankruptcy plan are resolved, Wall Street will view Orange County with skepticism.
"I feel comforted in that there is an organized effort among the business community to be involved," said Amy Doppelt, a managing director at Fitch.
The health of Orange County's economy is certainly a factor in the county government's ability to repay its long-term debts, she said. "But I'm not confident that the [recovery plan] will happen without any glitches."
Doppelt pointed out, for example, that the recovery plan could be disrupted by a number of suits filed by local government agencies.
Despite the cool reaction from Doppelt and others, Wedin called Monday's trip a success.
"We are not so egocentric to assume they're going to roll over and re-rate all [the debt]," Wedin said. "But we become one of a whole lot of sources they now check. They've now seen faces of people they can call, and they know we have a similar objective to theirs."
Wedin said the three leaders paid for the trip themselves, partly because they believe the bankruptcy "casts a pall" over private enterprise in the region.
The Orange County businessmen also delivered their message to investment bankers and bond buyers who attended a lunch sponsored by the Business Council and the Los Angeles Economic Development Corp.
Meanwhile, the Business Council is expected to announce today that it has raised $7.8 million to fund a consortium dedicated to attracting new businesses to the county and keeping current corporate tenants from leaving.
The money, which will be collected from donors over a five-year period, will pay for the salaries and activities of the Economic Development Consortium. Wedin said he referred to this project during meetings in New York on Monday as a symbol of Orange County businesses' dedication to nurturing the local economy.
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