O.C. Officials Frustrated by S&P;’s Refusal to Raise Rating

Standard & Poor’s rating agency refused to raise Orange County’s bankruptcy-battered investment rating Thursday, prompting frustrated county officials to accuse the agency of bias.

The county has been aggressively courting Wall Street for an improved credit rating all year, but Standard & Poor’s Corp. said in a report released Thursday that the county’s recovery from bankruptcy is not solid enough to warrant an upgrade.

The agency did, however, revise the county’s outlook from “stable” to “positive,” a sign that the rating could be upgraded in the future.

“The county has taken some positive steps . . . but it has a ways to go,” said Jeffrey Thiemann, a director in S&P;’s San Francisco office.

Gary Burton, the county’s chief financial officer, suggested that the agency’s analysis might be colored by a lawsuit the county filed charging the company--and a dozen other Wall Street firms--with having helped cause the 1994 bankruptcy.

The county emerged from bankruptcy in 1996 by issuing $800 million in bonds and using the proceeds to pay back investors.

“We are out of bankruptcy. We have a new management. We have a new Board of Supervisors,” Burton said. “Why are they dwelling on” the bankruptcy?

Thiemann denied that the lawsuit played any role in the report.

“My work is completely separate from that,” he said.

The county’s “B” rating is five places below an “investment grade” rating. With the “B” rating, the county cannot borrow money for needed capital projects without paying prohibitively high interest and insurance rates.