MOODY'S EVALUATES ABILITY OF PARTICIPANTS IN THE ORANGE COUNTY,
CALIFORNIA INVESTMENT POOL TO MAKE DEBT SERVICE PAYMENTS DUE FEBRUARY 1995
NEW YORK, New York--January 24, 1995--Moody's Investors Service has
evaluated the 17 participants of the Orange County, California Investment Pool
(OCIP) with February debt service payments to determine their ability to make
these payments in full and on time. Ratings of these participants were placed
under review because these issuers had invested moneys in the Orange County
Investment Pool, which filed for bankruptcy on December 6 and has suffered a
22% loss. Based on our discussions with each of these participants and
appropriate documentation, it appears that each participant in our survey will
be able to make its February payments coming due. This survey covers
unenhanced, uninsured ratings.
This survey is based on conversations with, and documentation received from,
the individual Pool participants. Interim guidelines approved by U.S.
Bankruptcy Judge John Ryan provide for withdrawals for emergency needs of up
to 30% of each OCIP participants' investment, subject to the approval of the
creditor's committee. The guidelines limit total withdrawals from the OCIP to
$1.0 billion. In addition, there are no restrictions on participants'
revenues received after December 6. These funds are held in a new and
separate investment pool.
The survey focuses solely on each participant's ability to make its February
payments. Concurrently, we are evaluating the overall credit quality of all
rated participants, given their current inability to access much of their
funds frozen in the OCIP, to determine whether the ratings should be removed
from the review list or otherwise revised. It remains clear that the impact
of investment losses varies from participant to participant. The results of
these more comprehensive reviews will be announced as they are completed over
the next few weeks.
Participant Rating (1) Debt
Outstanding
Anaheim & Anaheim UHSD
Community Center Authority A1 $8,638,000
Brea Olinda USD COPs
Series 1994B Baa1 12,785,000
Capistrano USD A1 2,950,000
Chowchilla UHSD
1990 COPs Con. (Baa) 1,720,000
Cypress Redevel.
Agency COPs A1 5,830,000
Fullerton Parking
Authority Lease Rental
Series 1974 A 75,000
Huntington Beach UHSD
1992 COPs A 1,225,000
Huntington Beach
Pub Fin Authority Ba 32,715,000
Irvine Ranch
Water District 1 A 230,000
Laguna Beach Aa 20,000,000
Local Govt. Fin Authority
Fullerton Redel. Agency
1989 Refunding A 3,920,000
Los Alamitos USD
Comm. Fac. Dist.
No 90-1 Baa1 11,920,000
Mountain View Shoreline
Regional Park Commission A 24,870,000
Orange Co.
Flood Control District Aa 3,285,000
Orange Co. Local
Transportation Authority
Sales Tax Revenue Bonds
First Senior Aa 262,930,000
Orange Co. Water District
1989 COPs Aa 26,760,000
1993 A COPs Aa 148,610,000
Saddleback Comm. College
1991 COPs Baa1 4,930,000
(1) All ratings currently under review.
Anaheim & Anaheim Unified High School District
Community Center Authority
According to the Notice of Redemption dated December
22, 1994, the Authority will be calling all outstanding
maturities for optional redemption on February 1, 1995.
Brea Olinda Unified School District
The District states that it made its $592,000 lease
payment (consisting of an interest payment) to the Trustee
for the 1994 Series B certificates (due January 15 for
payment to certificate holders on February 1) from funds
released from the OCIP and from revenues received since the
bankruptcy filing on December 6, 1994.
The District invested approximately $5 million in the
OCIP. The entire amount represents surplus funds which are
not essential to funding operations for the current year.
The District projects that it will be able to cover
operating expenses, including debt service payments, through
the end of the year from revenues and from funds released
from the OCIP thus far. The District does not anticipate
mid-year budget adjustments.
Capistrano Unified School District
The District has $1,125,000 in principal payments due
February 1 for its 1975 and 1976 general obligation bonds
and $225,000 principal payment due February 15 on its 1974
general obligation bonds. Total interest payment due on all
three issues is $77,100. The District reports that it
submitted a request for an emergency withdrawal from the
OCIP for the full amount of debt service payments due in
February and that they received verbal confirmation of such
withdrawal.
The District had $72.9 million invested in the OCIP.
Since the bankruptcy filing the District has been able to
withdraw $7.7 million from the Pool to meet payroll and
other emergency payments. At the current time, the District
has $28.2 million deposited in the post-bankruptcy fund
which will be used to provide for general operating expenses
including payroll and utilities. The District has an
additional $14 million collected in the newly formed
investment Pool which has been set aside for repayment of
the District's TRAN. The TRAN was issued as part of the
Orange County 1994-95 TRANs (Pooled), a pool of school
district notes.
Chowchilla Union High School District
The District reports it made its debt service payment
of $324,000 (principal and interest) for the 1990 COPs to
the Trustee on January 15 for payment to the certificate
holders on February 1, 1995. Located in Madera County,
Chowchilla Union High School District had $2.5 million
invested in the OCIP as of December 6, 1994.
This includes $1.1 million in TRAN proceeds and $700,000 set
aside for debt service payments. Immediately after the
bankruptcy filing, the District had $479,000 of General Fund
moneys, $202,000 of developer fees and $126,000 in debt
service funds, all invested with the Madera County
Investment Pool.
The District anticipates sufficient resources to meet
operating expenses and to make debt service payments even if
it is unable to access its funds frozen in the OCIP. There
is some surplus in the current budget because the District
budgeted ADA fairly conservatively. Also, the District did
not include OCIP interest earnings in the operating budget.
Cypress Redevelopment Agency
1991 Certificates of Participation
The Agency expects to make an upcoming interest payment
of $194,000 due on February 1, 1995 from funds held outside
of the OCIP.
The Agency had $5.8 million invested in the OCIP which
comprised approximately 17% of its total funds. Outside of
the OCIP, the Agency has $20 million invested with the
State's Local Agency Investment Fund (LAIF), $5 million in
government securities held by the City, $1 million in mutual
funds and $2 million with various Trustees. This includes
the $534,000 Debt Service Reserve Fund for the 1991 COPs
held by the Trustee Bank.
Fullerton Parking Authority
Lease Rental Series 1974
The Authority plans to make the upcoming interest
payment of approximately $3,000 from moneys held outside the
OCIP. In addition to investments in the Pool, the City of
Fullerton had (as of December 1, 1994) $6.8 million invested
with LAIF, $1.4 million in the City's checking account and
$1 million in various Treasury Bills. The Series 1974 Debt
Service Reserve Fund of approximately $40,000 is held by the
Trustee and invested in U.S. Treasury Bills. Based on
preliminary analyses, the City reports that it has enough
liquidity to cover its needs.
Huntington Beach Unified High School District
1992 Certificates of Participation
The District reports that it can make its $154,355 debt
service payment due to certificate holders on February 1 on
the 1992 certificates from revenues on hand and from
permitted withdrawals from the OCIP since the bankruptcy
filing. The District has also been able to make a $7
million segregation due in December for district TRANs.
As of December 6, the District had $19.8 million frozen
in the OCIP. Since the bankruptcy filing, the District has
withdrawn $3.6 million and is entitled to withdraw an
additional $2.2 million for emergency purposes under the 30%
withdrawal limit allowed by the County and approved by the
bankruptcy court, subject to approval of the Creditors
Committee. The District estimates that it can proceed
through the end of this month without additional withdrawals
from the Pool. Further, the District expects that it can
operate through the end of the fiscal year with incoming
revenues and the remaining $2.2 million permitted
withdrawal. Integral to this, however, is the need to make
expenditure cuts.
The District has already initiated a hiring freeze and a
freeze on discretionary spending. Budget adjustments will
need to compensate for a significant decrease in interest
earnings as a result of the OCIP bankruptcy. The District's
budget assumed $1.7 million in interest earnings. The
District expects to lose $1.3 - 1.5 million of this amount
as a result of investment losses in the Pool.
Huntington Beach Public Finance Authority
Huntington Beach Public Finance Authority indicates it
will be able to make its upcoming interest payment of
$55,000 due on February 1 from tax increment revenues
collected post-bankruptcy and from other funds on hand.
Huntington Beach had approximately two-thirds of its funds
invested with the OCIP and the remaining one-third, or $22
million, held outside the OCIP in City investments and with
the state LAIF.
Irvine Ranch Water District 1
The Irvine Ranch Water District 1 has two remaining
principal payments - on August 1, 1995 and August 1, 1996 -
totaling $230,000 and an interest payment due February 1.
District operations are funded from user charges and debt
service is funded from property tax collections. The
District reports that it will make the upcoming February 1
interest payment from property taxes collected to date.
The District's balance of approximately $300 million in
the OCIP comprise essentially excess funds. Outside of the
OCIP, the District has net investments of $140 million. The
District reports that these funds are invested in Treasuries
and Agencies.
Laguna Beach
The City of Laguna Beach plans to make its upcoming
$628,000 interest payment due February 15 on its 1990
general obligation bonds from moneys held outside of the
OCIP. The 1990 bonds are the only outstanding debt of the
City
At the time of the bankruptcy, the City had $7 million
invested in the OCIP and $8 million, or 53% of its funds,
invested in the State LAIF and with Bank of America (debt
service funds). The $8 million held outside of the OCIP
will help the City to mitigate whatever short-term cash flow
pressures may arise.
Local Government Finance Authority
Fullerton Redevelopment Agency
Fullerton reports that it will be able to make its
principal and interest payment of $235,168 due on February 1
for the Redevelopment Agency's 1989 Refunding COPs from
funds held outside the OCIP. The 1989 Debt Service Reserve
Fund is held by Bank of America, the Trustee. At the time
of the bankruptcy the City had $18.3 million
invested in the Pool which includes $3.7 million of the
City's 1994 $4.5 million TRAN issue. The City has $6.8
million invested with the State LAIF and $1.4 million in
checking accounts.
Los Alamitos Unified School District
Community Facilities District No. 90-1
The District reports that it will be able to make the
$416,000 Interest payment due on February 15 for its special
tax (Mello Roos) bonds.
The District intends to make the interest payment from taxes
collected from the District's Community Facilities District
No 90-1 that are held in the County's post-bankruptcy pool.
Mountain View Shoreline Regional Park Commission
The Mountain View Shoreline Regional Park Commission
reports that it will be able to make its upcoming $672,000
interest payment due February 1 on its 1993 Tax Allocation
Bonds from moneys held in its operating funds. At the time
of the bankruptcy filing, the Commission had approximately
one-third of its funds invested in the OCIP. The Commission
receives approximately $11 million annually in tax increment
revenues. The $11 million in annual revenues is sufficient
to cover the annual debt service payments for both the 1992
insured and the 1993 series of parity tax allocation bonds
of the Commission, the total annual debt service of which
collectively is approximately $4.1 million. All proceeds
from the Mountain View Shoreline Regional Park Commission
1993 Bonds are held with the Trustee. The reserve fund of
approximately $1.9 million is also held with the Trustee.
Orange County Flood Control District
The Orange County Flood Control District has a $1.115
million debt service payment due February 1 on its general
obligation bonds. The Flood Control District is a separate
arm of the County that has not filed for bankruptcy
protection. As a result, it is being treated as one of the
participants in the Pool rather than as a County entity.
District officials anticipate making the debt service
payment due on February 1 from three sources: $305,000 of
property taxes received after the bankruptcy filing,
$258,000 from property taxes received for debt service prior
to the bankruptcy and held in the OCIP, and $552,000 of
capital funds invested in the OCIP. The District has
submitted a request for the $810,000 withdrawal from the two
funds in the OCIP. There is some confusion, however, due to
a County petition filed with the bankruptcy court to pay
debt service on Flood Control District bonds. The petition,
which is requesting release of funds to pay debt service,
asserts that the Flood Control District bonds are General
Obligation Bonds of the County. It is not clear, at this
time, how these potentially competing claims will be treated
by both the Creditors Committee and the bankruptcy court.
Orange County Local Transportation Authority
Sales Tax Revenue Bonds, First Senior Bonds
The Orange County Local Transportation Authority
reports that it is prepared to meet debt service payments
due on February 15 in the amount of $21,686,000 (principal
and interest) for the First Senior, Sales Tax Revenue Bonds.
The Authority is prepared also to make a principal and
interest payment of $24,516,000 on February 15 for the
Authority's Second Senior Sales Tax Revenue Bonds which are
FGIC insured. Debt service payment will be made from a
number of sources including: Measure M sales tax revenues
collected in the months of December, January and
February, expedited receipt of $16.6 million of
State and Local Partnership Act dollars which are
funded through a portion of the state gas tax, and a $46.5
million post-bankruptcy withdrawal from the OCIP.
Historically, monthly receipts of Measure M sales tax
revenues have averaged $10-12 million per month. Post-
bankruptcy, the Authority is directing all monthly sales tax
revenues to the Trustee for investment.
The Authority has $1.15 billion invested in the OCIP,
representing virtually 100% of its assets, at the time of
the bankruptcy. OCTA holdings comprise 15% of the pool,
making the Authority one of the largest participants in the
Pool. The Authority Board of Directors implemented a 100-
Day Strategic Plan on December 12, 1994 in order to ensure
timely payment of February 15 debt service and to continue
to provide transit services to the county's 2.6 million
residents. Moody's Press Release dated December 19, 1994
discussed some of the salient features of the Authority's
100-Day Strategic Plan.
Orange County Water District
The Orange County Water District has two debt service
payments due on February 15. These are the District's
Certificates of Participation 1990 Project, $814,988 and
the Revenue Certificates of Participation Series 1993 A,
$3,740,629. Moody's has been informed that District
officials have already deposited funds with the Trustee
sufficient to fully fund these upcoming debt service
payments.
The District had $118,419,000 deposited in the Orange
County Investment Pool at the time of the county's
bankruptcy filing. To date, the District has received
disbursements from the Pool of $29,356,481. It is noted
that included in the District's funds held in the Pool was
$13,286,936, representing the Debt Service Reserve Fund for
the Series 1993A Certificates of Participation.
District officials are actively seeking alternative methods
to fund the reserve, such as through the acquisition of a
surety or letter of credit.
Saddleback Community College District
According to representatives of the District, an
interest payment of $192,676 for the 1991 Certificates of
Participation and an interest payment for the District's BIG
insured 1989 Certificates of Participation, both due on
February 1, 1995, were submitted to the Trustee on December
12, 1994. Payment was made from property taxes collected
and deposited in the post-bankruptcy fund held by the
County.
Substantially, all of the District's funds - $23.5
million - were invested in the OCIP. The total $23.5
million was comprised of $10 million general operating
funds, $3.9 million self-insurance funds, $3.7 million
capital outlay funds, $2.7 million debt service funds (prior
to drawdown of December 12), $1 million trust funds and $0.9
million set aside as Child Development Program funds. None
of the District's debt service reserve funds were held in
the OCIP; all are held by the Trustee, primarily in
government securities. To date, the District has received
approximately 15% of its funds invested in the OCIP.
CONTACT: Chee Mee Hu
Vice President/Supervisor
Far West Region
212/553-3665
OR
Barbara Flickinger
Vice President/Assistant Director
Far West Region
212/553-7736
