U.S. Trust Co. of New York, the trustee of the Richmond, Calif., Unified School District's defaulted certificates of participation, informed holders last week that they will have two choices under a settlement signed by all parties to the investor lawsuit.

Certificate holders can cash out their investments in February, when the district is expected to refinance the $9.8 million issue under the settlement and make about $4 million of payments in arrears. Or they can continue receiving the rest of their scheduled payments on the 10-year issue, which was sold in 1988.

The settlement is still contingent on the California Legislature passing, and Gov. Pete Wilson signing, a bill authorizing the refinancing of the defaulted issue with a 30-year certificates issue.

The refinancing is expected to reduce the district's scheduled annual payments to $800,000 from about $1.4 million.

Unusual security provisions on the refinanced offering would ensure that investors in the defaulted certificates as well as the new certificates receive scheduled payment. Proceeds from the refinancing would be placed in an escrow account invested in U.S. government securities, accessible only by the trustee of the issue, and would be used to pay off the defaulted issue.

Also, the refinancing bill contains a provision authorizing the state comptroller to divert the school district's regular state aid payments to pay off the refinanced issue if the district fails to make payments on time.

-- Patrice Hill, Washington, D.C.

The Compton Unified School District is seeking a second emergency loan from the state, the district's interim administrator said on Friday.

District officials in July obtained a $10.5 million emergency loan from the state. But Stanley Oswalt, the interim administrator, said another $9.1 million loan is needed to help balance the district's budget.

A contract lobbyist for the financially troubled district said in July that the first loan totaled less than the school system's estimated deficit.

The new loan will require legislative approval. Assemblyman Willard H. Murray Jr., D-Paramount, will be asked to sponsor the bill.

Oswalt's latest proposal is controversial, largely because he also seeks broader power to eliminate union contracts, to lay off employees with 60 days' notice, and to dismiss the school board.

Such power is necessary to restore financial stability as soon as possible, according to Oswalt, a state-appointed administrator who was put in place as a condition for the state's first emergency loan. Oswalt is running the district until the state hires a long-term administrator.

Despite the problems, district officials have noted that they have remained current on payments securing a 1987 certificate of participation issue.

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