O.C. refinancing to shave $400 million in debt

Supervisors agree to a plan that will pay off bankruptcy bill 10 years early.

April 20, 2005
By: NORBERTO SANTANA JR.
Orange County Register

SANTA ANA – The financial sting from the Orange County bankruptcy will end a decade early under a refinancing plan unanimously approved by supervisors that will save more than $400 million.  
 
In a move similar to home refinancing, supervisors decided Tuesday to take advantage of historically low interest rates to refinance nearly $800 million in debt left over from the 1994 bankruptcy. That year, the county's investment pool suffered $1.6 billion in losses after the then-county treasurer's investment schemes imploded.  
 
County government issued bonds to repay investors and took on the debt, which costs county coffers nearly $90 million each year.  
 
By refinancing, the debt will be paid by 2016.  
 
Other supervisors credited Supervisor Jim Silva for prodding the board to set aside millions each year for early repayment. With more than $116 million in reserve, officials said the money also made it easier to repay the debt early.  
 
"Early repayment makes sense for the taxpayer," Silva said. In the background, financial institutions are already jockeying for the chance to underwrite the new bonds.  
 
An advisory panel has listed 13 qualified firms, but some supervisors want to see more competition, arguing that it will drive costs down.  
 
If that happens, one bidder might well be Merrill Lynch, though Silva and Supervisor Tom Wilson would vigorously oppose the giant brokerage firm.  
 
The other three supervisors seem more open to the firm, which paid more than $460 million to the county and other entities to settle allegations that it helped structure then-Treasurer Robert Citron's risky investments.