TCR_Public/950705.MBX


BANKRUPTCY CREDITORS' SERVICE, INC.





        Rating News: Moody's Views Orange County's Proposed
        Extension of Notes as a Default
   

      

            NEW YORK, NY--July 5, 1995--Orange
County
's plan to extend the maturities on some of its notes due this summer
received bankruptcy court approval on Tuesday, June 27.   
   

      

            Noteholders will vote by July 7 on whether to accept the
        proposed extension.   
   

      

            It appears that the county's perspective is to seek the
        extension because it does not have the resources to fully repay the
        noteholders at this time.  Thus, the rollover, which would affirm
        the county's obligation on the notes, is an effort at accommodating
        the municipal market to maintain access for the county.  It is
        important to note that the county, because it is in bankruptcy, is
        under no obligation to make payment on the notes by the stated due
        dates.  From Moody's perspective, the county's affirmation of its
        obligations should be unconditional and outside the terms of an
        extension agreement.  An extension agreement should be intended to
        compensate creditors for their consideration.   
   

      

            If the county had offered noteholders a voluntary workout plan
        that adequately compensated those who accepted an extension and
        offered others payment from available cash, it could have
        represented a realistic contingency in the attempt to gain order
        during a difficult period in the county's bankruptcy.  Instead, as
        discussed below, the county is agreeing that payment on the notes is
        not limited to revenues from fiscal year 1994-95, in contrast to the
        state constitution's debt limitation provisions.  But the county
        offers no significant compensation to noteholders for extending the
        maturity and the county's waiver may still be subject to challenge.
        The county, in effect, is attempting to pressure noteholders to
        accept extension through the threat of nonpayment.   
   

      

            In addition, the county has not identified any potential revenue
        streams to repay the debt next year.  The half cent sales tax vote
        failed on Tuesday, and expected increased revenues at the county's
        landfill through imported garbage are unlikely.  These revenue
        streams would have supported debt that could have financed a means
        by which to pay noteholders next year.  Now the prospects for an
        economically sufficient plan remain dismal for the coming year.   
   

      

            The following is a review of the evolution of the extension
        agreement, its terms and its shortcomings.   
   

      

        The Dilemma
   

       

            The county has $800 million in short-term notes due in July and
        August that would be affected by the rollover, comprised of $600
        million Taxable Notes due July 10; $169 million Tax and Revenue
        Anticipation Notes, Series A, due July 19; and $31 million Tax and
        Revenue Anticipation Notes, Series B, due August 10.  The Taxable
        Notes were issued to provide arbitrage earnings to the county as a
        source of operating revenues; the Tax and Revenue Anticipation  
   

      

            Notes were issued to finance the county's cash flow requirements
        for the 1994-95 fiscal year.  The county has other notes not
        affected by the agreement which it expects to repay from various
        sources.  Teeter Notes, due June 30, are expected to be repaid with
        the proceeds of Teeter Bonds sold this week; Pooled TRANs are
        expected to be repaid with the money school districts have set
        aside.   
   

      

            The county's dilemma from the pool's losses was twofold: the
        investment income it expected for operations has not been realized,
        and the money set aside to repay some of the notes was reduced by
        the investment losses.  In sum, the county does not have the
        resources to meet its financial obligations at this time, including
        the payment obligation on the notes.   
   

      

            With the filing of the bankruptcy and loss of investment income,
        the county elected to not make set asides as promised when it sold
        the Series A&B TRANs.  This action was contested by the noteholders,
        but was upheld by the bankruptcy court.  Thus, while funds would
        have normally been set aside for TRAN repayment throughout the
        fiscal year as revenues were collected, no post-petition set asides
        were made by the county.  Only $29 million in pre-petition set
        asides remain.   
   

      

           The Taxable Notes were issued by the county to provide money to
        generate investment income.  The proceeds of the Taxable Notes were
        invested in the Orange County Investment Pool, and were thus
        decimated by the pool's losses.  The investments made with the
        proceeds of the Taxable Notes, which were specifically intended for
        note repayment, were valued at $429 million when the pool was
        liquidated in late December, well below the $600 million principal
        amount due.   
    

     

         The Proposal
   

       

           After protracted negotiations, the county's final proposal seeks
        noteholder approval of the following:  
    

     
         

            The interest payments would be an administrative expense of the
        bankruptcy, which would provide them with a higher priority to some
        other creditors.  However, any payments yet to be made remain
        subject to a later attack or renegotiation under the bankruptcy
        code.   
   

      

            In addition to the terms of the extension, the agreement and
        related documents addressed several legal issues.  Key among these
        issues is the treatment of the extended short-term notes under
        California's debt limitation laws.   
   

      

         The County's Waiver of Right to Assert Constitutional Debt
        Limitations May Still Be Subject to Challenge
   

      

            California law limits a local government's ability to incur
        obligations in one fiscal year that would be satisfied from income
        and revenues derived in future fiscal years.  With certain
        exceptions, expenditures in any given fiscal year cannot exceed the
        resources available in that fiscal year to pay them.  The issuance
        of short-term notes does not fall within that debt limitation
        because the revenues available during the fiscal year are expected
        to be sufficient to repay the notes.   
   

      

            The county has posited that its lack of resources for fiscal
        1995 resulting from the investment losses may be interpreted as a
        loss of security for the notes issued during the year.  The county
        has suggested that, given that the revenues for 1995 may be less
        than the potential expenditures - operating costs and repayment of
        TRANs - the county would be violating the debt limitations to carry
        over any liabilities into subsequent fiscal years.   
   

      

            As part of the stipulation, the county "agrees that each of the
        issues of the note debt .  .  .  shall constitute a valid, fully
        liquidated and non-contingent, undisputed and enforceable claim
        against the county."  It goes on to state that the county waives and
        releases all defenses and objections to any of the debt under the
        Bankruptcy Code or related to the application or operation of the
        state debt limitation provisions.   
   

      

            Basically, the county is saying to noteholders, "If you agree to
        extend for a year, we will agree that you have a valid claim not
        subject to the debt limitation."  However, while the bankruptcy
        court has approved the county's waiver of these rights, another
        interested person, such as a taxpayer, could seek to invalidate the
        obligation as a violation of the constitutional debt limitation.   
   

      

         County Maintains Right to Repudiate the Taxable Notes
   

      

            More troubling than the coercive nature of the extension
        agreement and the potential for third party objection is the
        county's insistence on retaining the right to seek to invalidate
        some of the obligations it is presently asking holders to extend.
        Specifically, the agreement would enable the county to retain the
        right to contend that the Taxable Notes did not constitute a valid
        and enforceable obligation of the county at the time of issuance.
        We find the county's attempted retention of this right in the
        context of an extension agreement to be unacceptable.  Such action
        would set a dangerous precedent that would affect all California
        municipal issuers.   
   

      

         Difficult Decision
   

       

            Noteholders are faced with the following, limited choices:
        accept the county's proposal, and have the county acknowledge some,
        but not all, of its obligations; or reject the county's proposal
        with the likelihood of default and litigation.  Even with approval
        of the agreement by noteholders, given the county's lack of
        resources and retention of rights to repudiate the Taxable Notes,
        litigation may ensue.   
   

      

            The county could have demonstrated a good faith effort toward
        noteholders by releasing the accumulated reserves toward repayment
        of the notes.  Instead, the county has chosen to retain the note
        reserve possibly to use the money for other county purposes or to
        reallocate among creditors.  The extension merely offers noteholders
        what they already had, a pledge of the county to repay the
        obligations when due.  The extension, as proposed, would be, in
        effect, a default on these obligations.   
   

      

        CONTACT:  Moody's Investor Service, New York
                  Mary Francoeur, Assistant Vice President, 212/553-7240,
                  Karen S. Krop, Assistant Vice President, 212/553-4860,
                  Barbara J. Flickinger, Vice President and Assistant
                   Director Manager, Far West Regional Ratings,  
                   212/553-7736,
                  Katherine McManus, Vice President and Assistant Director,
                   Manager, Legal Analysis Group, 212/553-4036

         


          

        COLUMBIA GAS DEVELOPMENT ANNOUNCES DISCOVERY WELL IN NORTH DAKOTA
   

      

            HOUSTON, Texas--July 5, 1995--Columbia Gas Development
        Corporation, the Houston-based exploration and production subsidiary
        of The Columbia Gas System, Inc. (NYSE: CG),
announced today that an exploratory well (Hondl well No. 15-1) in the Lodgepole oil
play in Stark County, North Dakota, has found reserves of oil and natural gas.
   

      

            The Hondl well encountered the carbonate reservoir at a depth of
        almost 10,000 feet.  The well was drilled 80 feet into the oil
        bearing reef and cased after the drill stem test showed the presence
        of oil and natural gas.  Subsequent drilling on this reef will
        determine the total thickness of the oil column.
   

      

            Columbia Development said the Hondl discovery well, which is
        more than three miles from other successful wells, represents a
        significant extension to the known productive area of this prolific
        new oil play. The company expects to participate in additional wells
        in the Lodgepole play during 1995.
   

      

            Columbia holds a 50 percent working interest in the Hondl
        discovery well.  Summit Resources Limited, a Canadian corporation
        has a 20 percent working interest, and Jordan Oil and Gas L.P., T.
        Keith Marks, and the well operator, The Armstrong Corporation, hold
        the remaining 30 percent.
   

      

            The Columbia Gas System, Inc., is one of the nation's largest
        natural gas systems.  Subsidiary companies are engaged in the
        exploration, production, purchase, storage, transmission and
        distribution of natural gas and other energy operations such as
        cogeneration.  The Columbia Gas System, Inc., and its principal
        pipeline subsidiary, Columbia Gas Transmission Corporation, have
        been operating as debtors-in-possession under Chapter 11 of the
        Federal Bankruptcy Code since July 31, 1991.
   

      

        /CONTACT:  H.W. Chaddock of Columbia Gas, 302-429-5261/
   





         

        All For A Dollar announces Joint Plan of Reorganization is confirmed
   

      

            SPRINGFIELD, Mass.--July 5, 1995--All  
        For A Dollar Inc. (NASDAQ: ADLRQ)
, announced that the Joint Plan of
        Reorganization was confirmed June 30, 1995 by the U.S. Bankruptcy
        Court in Worcester, Mass.   
   

      

            The effective date for the Chapter 11 Plan was July 3, 1995.
        All For A Dollar Inc. (AFAD) has been operating under Chapter 11 of
        the United States Bankruptcy Code since June 27, 1994.
   

      

            The plan was deemed confirmed June 30, 1995 when AFAD deposited
        approximately $3.6 million into a special account for the exclusive
        purpose of making distributions pursuant to the plan.
   

      

            The deposit was made possible by AFAD through cash on hand,
        borrowings under it's existing line of credit, and by completing a
        $1.5 million private placement of two-year notes with warrants.  The
        notes provide for varied principal payments through July 1, 1997.
        The warrants entitled the holders to purchase up to 1,195,400 shares
        of common stock at a price of $.50 per share excercisable over a two-
        year period.
   

      

            The plan provides for a 35 percent cash settlement of all
        unsecured claims incurred by AFAD prior to its Chapter 11 case
        filing.  Administrative claims, priority claims and all tax claims
        will be paid in full.
   

      

        CONTACT: All For A Dollar, Springfield
                 Donald A. Molta, 413/733-1203