IRVINE : Schools May Yet Need Extra Time on Debts

Irvine Unified School District officials, welcoming a bankruptcy court’s approval of the county investment pool settlement plan, nevertheless warned that the district may be unable to pay $54.5 million in debt payments due June 13.

The district has discussed the possibility of extending the due date for the payments with two bondholders, Deputy Supt. Paul Reed, who oversees district finances, said Wednesday.

“We certainly do not want to default,” Reed said. “But we may have to extend the maturity of these notes. Technically, that would not be a default.”

The Irvine district is one of five education agencies that borrowed heavily to earn additional money in the county pool. The school board approved the $54.5-million investment plan in June, 1994. The loan was financed by the government-sponsored mortgage corporation nicknamed Fannie Mae and the Charles Schwaab mutual fund group.

Irvine Unified had $107 million in the investment pool, more than any other school district, when the county declared bankruptcy Dec. 6.

The agreement approved Tuesday to distribute the $5.7 billion remaining in the county pool will bring Irvine Unified approximately $65 million by May 19, according to Reed. The settlement plan’s recovery notes, promised by the county to be “good as gold,” could bring an additional $14.5 million to the district by June 5.

“What we don’t know is what alchemy process the county will use to render the notes good as gold,” Reed said.

Even if the recovery notes can be converted to cash before the June 13 bond debt comes due, the district may be short of cash. At issue is a complex set of regulations requiring the debt to be repaid with money received during the fiscal year--1993-94--in which the loan wasmade.

District officials are still unsure how much of the money returned under the investment pool settlement plan will be available for repayment of the bond debt. And the district is also relying on part of the recovered funds to continue district operations through the end of the current school year.