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MOODY'S NEWS -- ORANGE CO., CA TRANS. AUTH. RATINGS CONFIRMED; Orange County Transportation Authority Ratings Reviewed and Confirmed.

NEW YORK--(BUSINESS WIRE)--Feb. 10, 1995--On December 6, 1994, Moody's Investors Service placed under review ratings of issuers which have funds invested in the Orange County Investment Pool. Included among the ratings placed under review were related issues of the Orange County Transportation Authority (OCTA) which is the consolidated agency responsible for all transportation planning and services in Orange County. OCTA is the oversight authority for the Orange County Local Transportation Authority (OCLTA), the Orange County Transit District (OCTD) and the Orange County Service Authority for Freeway Emergencies (OCSAFE). Effective today, Moody's Investors Service has reviewed and confirmed the following OCTA ratings. Confirmation of the various ratings reflects continued strong coverage of debt obligations by pledged revenues, OCTA's flexibility to adapt its capital program to a potential loss in capital funds, and strong management capabilities. -0-

Issue Moody's Amount

 Rating Outstanding

Orange County Local Transportation Authority

Sales Tax Revenue Bonds, First Senior Aa $315,630,000

Sales Tax Revenue Bonds, Second Senior
due 2/15/95 A1 $6,700,000

Orange County Local Transportation Authority
Commercial Paper Program P-1 $200,000,000 (1)

Orange County Transit District, 1990
Business Acquisition Project COPs A1 $11,120,000

California Transit Finance Corporation - Orange
County Transit Authority, COPs 1993C A1 $21,100,000

( 1 ) Maximum authorization

The OCLTA also has outstanding $368,615,000 of second Senior Sales Tax Revenue Bonds which are insured by FGIC and rated Aaa and $3,425,000 Orange County Service Authority for Freeway Emergencies- Orange County Public Facilities Corporation COPs also insured by FGIC and rated Aaa.

The OCTA had invested $1.1 billion in the Orange County Investment Pool (Pool) comprising approximately 15% of the entire Pool. Of the total $1.1 billion investment, $530 million consisted of bond proceeds from the Orange County Local Transportation Authority's 1992 and 1994 issues. The remaining $600 million investment consists of commercial paper proceeds, General Funds for various service programs including transit operations, and Debt Service Funds. At the time of the bankruptcy filing, OCTA had $38.7 million in various debt service reserve funds as well as approximately $7 million in cash deposits for general operating needs held outside the Pool.

The 100-Day Strategic Plan Identifies Sufficient Resources to Meet Debt Service Payments, Maintain Transit Service, and Proceed With the Measure M Program

Moody's reviewed the OCTA 100-Day Strategic Plan (Press Release of December 19, 1994) and the Authority's ability to make debt service payments due in February (Press Release of January 24, 1995). The OCTA took immediate actions to identify sufficient resources to meet all Authority obligations at least through March. These resources include:

Withdrawals from the OCIP $122,806,034

Early Receipt of State and Local Partnership
Funds via Caltrans $15,213,415

Measure M sales Tax Revenues (through 1/30) $22,580,245

Federal Transit Administration Grant Advance $8,918,260

State Transportation Development Act Sales
Tax Revenues (for Transit Operations) $12,052,503

Distribution from CS First Boston Debt Service
Reserve Put Option Agreement $12,919,550

The OCTA intends to replenish the $12.9 million withdrawn from the CS First Boston Debt Service Reserve Put Option Agreement from cash on hand or through substitution of a Debt Service Reserve Surety Bond.

As a result of this early identification of resources and an immediate redirection of revenues to the Authority's Trustees and cash management banks, the OCTA has proactively maintained its operating and programmatic profile.

Orange County Local Transportation Authority Has Identified Sufficient Resources to Make Upcoming Sales Tax Revenue Bond Debt Service Payments

The OCLTA reports sufficient funds to make February 15, 1995, debt service payments totaling $46,202,000 for the 1992 First Senior Sales Tax Revenue Bonds, the 1992 Second Senior Sales Tax Revenue Bonds and the 1994 Second Senior Sales Tax Revenue Bonds. Both Second Senior issues are insured by FGIC. Cash flows provided by the OCLTA also include provisions for repayment of debt service on the Authority's Commercial Paper Program averaging $11 million each quarter.

At the time of the bankruptcy, the OCLTA had $173 million outstanding in commercial paper, composed of $100 million in taxable commercial paper and $73 million in tax-exempt commercial paper. As a result of the bankruptcy, the commercial paper could not be remarketed to the general public and rollover notes were initially purchased by the dealer-agent. At maturity, the dealer-agent notes were paid through a draw upon the line of credit provider -- Industrial Bank of Japan (IBJ), and converted to a bank loan. Recently, the Authority was able to withdraw $73 million from the Pool. The OCTA intends to use these funds to reduce the Commercial Paper Program as part of the Authority's negotiations with IBJ to convert its line of credit to a direct-pay letter of credit, thereby regaining access to the commercial paper market some time perhaps in the next two months. The current rating of P-1 will be withdrawn at Program termination. Should the Commercial Paper Program be restructured with a direct-pay letter of credit, the rating will reflect the change in security.

Going forward, the OCLTA expects to have sufficient resources to meet future debt service payments for all its sales tax revenue bonds from Measure M sales tax receipts collected post-bankruptcy and deposited with the Trustee Bank. Historically, the Authority has received an average of $10-12 million in Measure M sales tax revenues per month. Fiscal year 1995 receipts of Measure M sales taxes (through January) totaled $76.7 million which was 4.2% higher than the comparable period in fiscal year 1994. A December analysis prepared for the OCTA, assessing the economic impact of the Orange County bankruptcy on sales tax revenue projections, indicated a decline in total job creation by 4,000 which translates into a negligible 0.3% reduction in taxable sales countywide. The OCLTA expects debt service coverage to remain basically on track going forward.

Expected Loss of Funds Are Not Expected to Affect Measure M Priority Projects

The voters of Orange County authorized the collection of a half-cent sales tax for transportation improvements in November, 1990. The $3.0 billion Measure M Program outlines clear funding parameters including a 43% allocation for freeways, 25% for transit, 11% for regional streets and roads and 21% for local streets and roads. Within the category of freeway construction, the revised Freeway Strategic Plan adopted on November 14, 1994, identified some 30 priority projects including improvements to the Santa Ana Freeway (I-5) as well as Interstate 405. The OCTA is proceeding with key projects including work on the El Toro interchange, work on I-5 south, and right-of-way ''Y'' acquisition for I-5 north. The Authority reports that because it was aggressive in its financing program, environmental clearance, project design and state and local agency coordination, it made greater progress than expected and reduced certain project costs early on in the program. As a result, the Authority reports that it has sufficient flexibility to delay or modify certain freeway construction projects pending resolution of the Pool bankruptcy. As long as the overall Measure M Program adheres to the funding allocations between freeways, transit, regional and local roads, the Authority has some ability to shift projects in terms of timing and scope. As an example, the Measure M Program allocates $340 million for a 28-mile, high-technology rail system running from Fullerton to Irvine. The Authority embarked on a $3 million Major Investment Study to assess the degree of public support for the program and to develop project alternatives. If the study reveals insufficient need/support for the project, the Authority expects that it can redirect these projects funds elsewhere. The project is currently on hold. This programmatic flexibility is important in the assessment of the Authority's long-term credit. Even if the Authority were to lose 22% of its Pool investments -- approximately $253 million -- because of earlier cost savings and the ability to defer or modify some projects within the overall Measure M Program, the Authority reports it will still be able to accomplish its capital plan.

Orange County Transit District Continues to Provide Normal Services and to Make 1990 and 1993C Certificate of Participation Lease Payments

Updated cash flows prepared by the Authority for its operating arms -- of which the largest component is the Orange County Transit District -- indicate that with withdrawals up to the currently permitted 30% of OCTA amounts held in the Pool, the OCTA will be able to sustain its normal level of operations at least until May 1996, without necessitating major changes to its operations. This ability reflects the adequacy and diversity of revenue sources for OCTD. The Transit District receives State Transportation Development Act sales tax revenues (approximately $5-7 million per month), FTA operating and capital grants, farebox revenues (estimated at about $1.4 million per month) and property taxes. OCTD reports that it will be able to meet debt service payments of $363,000 in June, 1995, $3,129,000 in July, 1995 and $1,088,000 in December, 1995 from FTA Section 9 capital grants and from General Fund resources.

Orange County Service Authority for Freeway Emergencies (SAFE) Debt Service Will Continue to be Paid From Department of Motor Vehicle Fees

Debt service of $114,000 due in April, 1995 and $599,000 due October, 1995 for the 1987 SAFE Certificates of Participation, which are insured by FGIC, will continue to be repaid from the $1 annual vehicle registration fee collected through the Department of Motor Vehicles. The certificates mature in 1999.

CONTACT: Chee Mee Hu

Vice President/Supervisor



Barbara Flickinger

Vice President/Assistant Director



Ken Kurtz

Vice President/Supervisor

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Date:Feb 10, 1995
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