LOS ANGELES -- The California treasurer's office yesterday postponed a $353.5 million refunding bond issue by the Regents of the University of California after some institutional investors complained that they had not expected the old bonds to be called until later this decade.

Market participants said wording in the official statement for a 1989 refinancing of the debt indicated that the regents did not intend to call the bonds before 1999, but the documents also state that the officials could redeem the bonds earlier if they chose to.

Some institutional investors said they had believed that the regents had no intention of exercising the call until 1999, and they voiced their displeasure when the state prepared to sell the new refunding issue.

Concern over the deal "came up rather suddenly in the last day or so," noted Hal Geiogue, an assistant state treasurer. He added that "there was some confusion in the marketplace" being relayed to state officials from various sources, including syndicates that planned to bid on yesterday's transaction.

The state decided to postpone the sale when it became apparent there "likely would be a penalty" imposed on the pricing because of the confusion, said Olena Berg, chief deputy treasurer.

Mr. Geiogue said that "our goal is to work out the problems and to go to market with the deal." He said state finance officials will be "trying to find a resolution" by holding a meeting soon with the parties involved in the transaction.

He said he was unsure at this point whether investors would be involved in the meeting, which would include officials from the regents.

Market sources in the underwriting and mutual fund communities confirmed yesterday that the proposed refunding raised the hackles of certain investors.

"The buyers were very upset to hear [the sale] was taking place," said one underwriter, who said that some investors apparently harbored a belief that the old bonds would not be refunded.

Yesterday's postponed sale was designed to refund the regents' Series 1986 multiple-purpose projects issue, which had been previously refinanced in 1989, according to market participants.

A California-based portfolio manager said yesterday that many institutional investors believed that the old bonds would not be called by the regents until 1999 at the earliest.

Mr. Geiogue confirmed that the confusion seemed to center on the bond documents for the old debt.

One market participant observed that the state appeared completely within its legal rights to call the old bonds. Nevertheless, state officials decided "in good faith" to postpone the sale until they could better ascertain "why people were upset," an underwriter said.

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