S&P; Refuses to Boost O.C.’s Credit Rating

SANTA ANA —  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 Standard & Poor’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 helping to cause the 1994 bankruptcy.

“We are not happy with this at all,” Burton said. “We don’t feel they accurately characterized the county’s financial picture. I think it might be tainted by the lawsuit we have filed.”

Burton criticized the firm for focusing on the county’s bankruptcy and early failure to meet some debt service payments rather than on more recent accomplishments. 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.

Standard & Poor’s rating related to $63.9 million in Orange County taxable pension obligation bonds. The “B” rating is still 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.

Burton said he remains hopeful that two other rating agencies, Fitch Investors Service and Moody’s Investors Service, will boost the county’s rating.