ORANGE COUNTY IN BANKRUPTCY : Montebello Receives Funds in Effort to Avoid Default : Debts: City gets $14 million toward note payment of $25.6 million due Friday. It will try to work out a plan to cover the rest.

The beleaguered city of Montebello received a $14-million infusion Wednesday from the bankrupt Orange County investment pool, clearing a major hurdle in the city’s effort to ease a financial crisis spawned by its investments in the county fund.

The payment, which was approved by two creditors committees and the county’s bankruptcy attorneys, was a key part of the city’s plan to avoid defaulting on a $25.6-million note payment due Friday.

Montebello officials had borrowed heavily this year to invest in the Orange County pool in anticipation of earning more money. The city planned to pull money out of the pool to pay off the $25.6-million note, but it was left in the lurch when the investment pool plunged in value early this month.

City officials have been working feverishly to put together a plan to meet the Friday deadline. Most of the $14 million is expected to be paid to seven unidentified institutional investors who provided the original loan in June. The investors have tentatively agreed to give the city more time to repay the remaining $11.5 million.

City Administrator Richard Torres said Wednesday he was optimistic that the deal can be pulled together by Friday. “We’ve averted a default,” he said.

Torres and the City Council met late Wednesday in closed session to discuss details of their plan to repay investors.

Torres acknowledged that the city still faces several financial hurdles. The city, for example, will face a new deadline on the remaining $11.5-million debt, plus interest. The city also has a September, 1995, deadline for paying another $6 million it borrowed to invest in the Orange County pool.

The city also will have to wrestle with the loss of an estimated $1.9 million in interest that officials had expected to receive from the city’s investment in the pool this year. The anticipated interest had been included in the city’s $32-million budget this year.

Montebello, a suburb of 60,000 that some residents like to call “the Beverly Hills of East Los Angeles,” first invested $7.8 million in 1991 in the Orange County pool, which was paying the highest interest around and was considered safe.

This year, the city invested $47 million in the Orange County fund, including $31 million that the city had borrowed at low interest rates and put into the pool in anticipation of greater gains.

Torres said he is confident that the city can pay its bills, but the uncertainty over the Dec. 30 debt payment led Standard & Poor’s Corp. to lower its rating earlier this month on two outstanding notes--the $25.6 million due Friday and $6 million due next September.