IRVINE : School Board Weighs Loan to Avoid Bankruptcy

The threat of bankruptcy still exists for the Irvine Unified School District, where officials are considering obtaining short-term loans due to uncertainty over the county settlement agreement.

The cash value of recovery notes promised in the county settlement agreement is critical to the district’s ability to pay a $54.5-million bond payment due June 13. The school board approved Option A of the settlement agreement, which promises about 14 cents on the dollar in recovery notes promised to be “as good as gold.”

“Without that 14%, we would not be able to make our bond payment,” said school board President Tom Burnham. The district hopes to use the recovery notes as collateral to seek loans from “another agency that doesn’t have the cash-flow problem we have.”

Irvine Unified had $107 million in the investment pool when the county declared bankruptcy Dec. 6. The school board voted last summer to borrow $54.5 million to make an additional investment in the pool. Even if the recovery notes can be immediately converted into cash, the district will have to borrow about $11 million to meet the June bond payment, Burnham said.

District officials are looking for short-term loans to prevent defaulting on the bond debt. Irvine Ranch Water District board President Peer Swan and the Irvine City Council have offered financial assistance to the 21,700-student school district.