Edison Pays County in Full and on Time for First $20 Million

The first of two $20-million investments the county made in Edison International was paid off on schedule Wednesday, though it will be months before the fate of the second investment is known.

County Treasurer John M.W. Moorlach, criticized by some for investing in the utility sector just as the state’s energy crisis worsened, confirmed the payment and said the money would be in the county’s account by midnight.

“We are encouraged that Edison International has paid their obligation in a timely manner,” Moorlach said in a prepared statement.

The investments--$40 million in all--triggered a downgrade in the credit rating of the county education pool two weeks ago. Even though Edison paid off one of the notes Wednesday, the rating will not be upgraded until the second bond is paid, the county’s rating agency said.

The $20-million bond that was repaid Wednesday was purchased Dec. 7 as California’s electric crisis worsened and Edison executives cautioned that the state’s second-largest utility could be pushed into bankruptcy.

Fitch Inc., the county’s credit-rating service downgraded the investment pool from AAA to AA after the stock of Southern California Edison, an Edison International subsidiary, fell to junk-bond status.

The county made its initial $20-million investment in Edison in September, a note that matures on July 18. Interest payments to the county are due the 18th of each month and, so far, all payments have been made.

“The [commercial note] paying off is very favorable,” Fitch analyst Steve Lee in New York said. “Nonetheless, we’re still keeping the rating as is. Credit-wise, we can’t upgrade until that [remaining debt] issue is resolved.”

The education pool holds about $1.3 billion in public school money. There are no utility investments in the county’s regular investment pool, which holds about $2 billion.

Many school finance officers expressed dismay that school funds were invested in Edison. The schools rely on interest earnings from investments to fund a multitude of programs--about $80 million a year. They faced having their interest earnings sliced in half if Edison defaulted on the notes.

Orange County schools are still recovering from the loss of millions of dollars in 1994 when the county’s then-single investment pool was declared bankrupt after losing $1.64 billion. Moorlach, a candidate against then-Treasurer Robert L. Citron, earlier warned that the incumbent’s risky investments could lead to staggering losses.

In the wake of the Edison investments, Moorlach said he will personally review any proposed trade that involves a company on credit watch. Edison had been put on credit watch by ratings agencies in early September because of the looming utility crisis.