Ratings firms review Southland bonds, avoid post-quake reaction.

The nation's top credit rating agencies quickly set up task forces to evaluate L.A.'s earthquake fallout to bondholders despite assurances from state Treasurer Kathleen Brown that California bonds are "no more at risk today than they were before the devastation."

Most assessors agreed it was too early to evaluate the damage, as they scrambled to do just that. Both Standard & Poor's Co. and Moody's Investor's Service expected to release lists by this week specifying which bond and lease issues might be affected.

Last Tuesday, Moody's released a statement that it "would not take any automatic rating action as a result of the earthquake." The agency also expected "no lease ratings will be immediately affected," noting it rates nearly 100 certificates of participation in L.A. County.

Amy Doppelt, a credit analyst who follows California municipal issues for New York's Fitch Investors Service, Inc., said a key consideration was whether dislocated residents and businesses would rebuild -- or relocate.

Tom Lyons, who runs the California Tax Free Income Fund for Transamerica Corp., agreed: "The bigger issues are long term -- what this means for outmigration from the state. The Los Angeles/Long Beach region provides one-third of all employment income generated in the state."

If the region's mounting crises lead to increased outmigration, he reasoned, lower tax revenues and pressure on California municipal bond ratings would result.

But Lyons and other traders also noted that -- at least in the past few days -- there has been little change in L.A.'s most widely followed issues: the Los Angeles Community Redevelopment Agency Tax Allocation-Bunker Hill Project; a Los Angeles Wastewater Revenue bond; and a Department of Water and Power electric revenue bond.

The three are actively traded and included in the Bond Buyer's top 40 municipal bond futures index.

According to Stephen Kelleher, who runs the municipal bond department for San Francisco investment bank Sutro & Co. Inc., the Bunker Hill bonds, which have a 5.60 percent coupon, were trading at 5.62 percent last Wednesday morning after being valued at 5.63 the Friday before.

The 5.20 percent Wastewater bonds were trading at 5.42, vs. a 5.43 Friday close, and the 5.25 percent DWP issues were at 5.51 vs. 5.53.

Assistant State Treasurer Hal Geiogue, who did his own market survey, also found no adverse reaction, though he admitted trading was light.

What's more, he noted, there was a distinct lack of new issues, and he warned of possible turbulence "down the road a piece." He said upcoming DWP bonds would provide a better market litmus test.

Initially, a new $85 million issue and a $192 million refunding were scheduled for Jan. 25, said one DWP official. The sale of the issues will be postponed to Feb. 1, said the official, to "better disclose damage to the department."

The DWP has $2.7 billion worth of electric revenue bonds and $560 million in (potable) water revenue bonds in the market, according to Phil Edwards, an analyst with S&P, which had given these issues an AA credit rating.

"At this point," said Edwards, "it's (the DWP) under review -- we're waiting on

information regarding the cost of the damage, lost revenue and sources of funding."

The market seems less concerned about credit conditions for the county's two non-government utilities -- at least in the short run.

Regarding Southern California Edison Co., Susan Abbott, who heads up Moody's electric utilities research area in New York, said, "We have not put it on the (Credit) Watch list."

She noted Moody's confirmed Edison's senior debt rating at Aa3 on Dec. 22, though it dropped the utility's preferred stock rating at that time from (aa3) to (a1) because of concerns about its future competitive position.

Longer-term, said Abbott, Moody's will track the earthquake's disruption of the local economy, which, she quipped, "wasn't looking so strong in the first place."

S&P and Fitch also said they would stand by their current ratings for Edison bonds.

The ratings picture is similar for Southern California Gas Co. Moody's analyst William Christman noted, "The (gas) company estimated they would have to spend $10 million on repairs -- that's a large amount of money but, in view of Southern California (Gas Co.)'s size, this would not affect their financial position."

In mid-November, Moody's gave the company's first mortgage bonds a rating of A2 -- well in the investment grade category, sustaining the improved rating these bonds secured last June, according to Christman.