Moody’s Investors Service on Monday gave its top rating to $295 million in bonds from California’s troubled Orange County, saying payments to investors were guaranteed by a bond-insurance company.
The bonds, which go on sale Tuesday, are the first municipal offering since the county’s investment pool filed for bankruptcy protection in December.
Proceeds go toward repaying more than 200 government entities in the pool, which lost $1.7 billion in the biggest municipal bankruptcy ever.
Payments on principal and interest are backed by MBIA Insurance Corp. But some investors have said they would be unwilling to buy the bonds, because the county already has put off other debt payments, earning distrust that could hurt the value of the new bonds when they are traded in the secondary market.
Moody’s said that without the insurance, its rating on the bonds would be substantially below investment grade, or deep in the junk-bond category.
