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O.C. Accelerates Bond Sale Date to Today

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TIMES STAFF WRITER

Prompted by strong investor demand and fears of future market uncertainty, Orange County moved up its $880-million bond sale one day to today.

Designed to end the county’s 18-month-old bankruptcy, the bonds were pitched to potential investors during two roadshows this week, one in Orange County on Monday and another in New York on Tuesday.

“Given the significant investor demand for these bonds, we’re moving up the sale,” said Christopher Varelas, of Salomon Bros., the county’s chief financial advisor.

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Another factor in speeding up the sale, said Varelas, was uncertainty surrounding Friday’s release of national employment data for May. A lower unemployment rate, for example, could fuel inflation fears, lowering bond prices and raising the county’s borrowing costs.

Today, the county plans to sell $757 million of tax-exempt “certificates of participation” backed by county-owned real estate, and $123 million of taxable pension bonds. Proceeds from the sale, which is expected to close June 12, will allow the county to pay its creditors and emerge from the nation’s largest municipal bankruptcy.

Many major municipal bond funds have reportedly already signaled interest in pre-sale agreements to buy the bonds. But others remain unconvinced.

“I don’t think the people in Orange County have figured it all out right now,” said William Loring, who helps manage about $5 billion in bonds for Colonial Management in Boston. “There’s just too many problems associated with the name--it wouldn’t make sense for us.”

However, another major fund manager, who did not want to be named, said he is eyeing the deal eagerly.

“Orange County post-bankruptcy is a very different animal than Orange County pre-bankruptcy,” he said.

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Despite the strong interest, lingering resentment at the county’s bankruptcy filing and threats to stiff creditors mean Orange County is likely to pay higher rates to borrow even though it bought costly bond insurance that guarantees top-notch ratings for the bonds.

Badly placed bets on interest rates by the county’s former treasurer, Robert L. Citron, forced it to file for municipal bankruptcy protection on Dec. 6, 1994.

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