ORANGE COUNTY IN BANKRUPTCY : Settlement Negotiations Break Down : Debt: Pool investors’ representatives can’t agree on details of repayment plan. County officials say they won’t be back to bargaining table before Friday.

Negotiations between Orange County and participants in its collapsed investment pool came to an unexpected halt Tuesday, as representatives of the investors haggled over details of a settlement plan without reaching an agreement and county officials said they would not return to the bargaining table before Friday.

“We don’t have anything more to talk about with them right now,” said Bruce Bennett, lead attorney in the county’s Dec. 6 bankruptcy filing. “We had an agreement with them on Sunday night that we were prepared to live by, and we think they should be prepared to live by.”

Stan Oftelie, chief executive of the Orange County Transportation Authority and chair of the Pool Participants’ Committee, said he remained dissatisfied with some of the language in the 60-page document but renewed his promise that a deal would be done by week’s end.

“Inch by inch, we’re getting closer,” Oftelie said after a four-hour meeting of the seven-member committee Tuesday afternoon. “We’re just continuing to revise. They’re grinding out the language and the approach. It needs fine-tuning and they (lawyers and accountants) continue to work on fine-tuning.”

Under the deal, nearly 200 schools, cities and special districts that placed money in the county’s pool would immediately be repaid 77% of their investment.

On top of that, schools would receive 13% and other investors 3% in so-called marketable “recovery notes.” For participants other than school districts, the next 9% would come from proceeds of the county’s legal actions against Wall Street firms the county blames for investment pool losses totaling $1.69 billion. The county would make its “best efforts” to return the final 10% to schools and 11% to other investors as it climbs out of bankruptcy.

To get the full-repayment plan--called Option A--investors must promise not to try to recover more money from the county via lawsuits. Those who want to pursue legal action could take Option B and be guaranteed just the 77%.

After attorneys and accountants spent most of the weekend nit-picking over numbers and rewriting the agreement, the pool committee Monday found four problems with what was supposed to be the final draft of the document. Two of those issues have already been resolved, according to sources on both sides of the table.

The committee’s two remaining complaints involve $255 million in recovery notes and $120 million of pool money that is still being held by investment banks and therefore could not be repaid to investors immediately.

County officials have promised the recovery notes will be “as good as gold” but are still searching for a practical mechanism to make that true. In the agreement, the county vows to have the mechanics in place by June 5. If the recovery notes are not equivalent to cash by that time, and the pool committee approves the deal anyhow, individual investors would be able to switch from Option A to Option B, according to the agreement.

Pool committee members objected Monday to the language describing what would happen if the recovery notes could not be cashed in by June 5. Bennett said Tuesday that he would be willing to drop that language.

The final issue concerns $120 million being held hostage by investment banks the county is suing, which amounts to less than two cents per dollar of the settlement. The pool committee is concerned because the agreement does not specify when that portion will be repaid. But county officials said they can promise only to get that money back eventually, through litigation, and have little control over the timing.

Pressure to reach an agreement has intensified in recent days because of looming court hearings and the prospect that some investors, particularly schools, could face bankruptcy themselves if a plan to disburse the remaining money in the pool is not reached soon. Some of the school districts could run out of funds well before the end of the school year.

“I think everyone is nervous,” Seal Beach Mayor George Brown said. “It seems like we had a deal, and now we don’t. I’m still hopeful we’ll get one, but I haven’t see anything yet.”

Steve Garretson, president of the Irvine Teachers Assn., likened the negotiating process to a ride on a roller coaster, saying “everybody is holding their breath until (the agreement) occurs.”

“Until this is finalized, we cannot relax,” agreed Michael Fine, director of fiscal services for the Newport-Mesa Unified School District. “Until the county signs the checks, everything is still up in the air.”

No checks will likely be signed for weeks yet.

County Chief Executive Officer William J. Popejoy and Bennett decided Tuesday not to budge on the agreement before Friday, in part because they are testifying in Sacramento for the next two days. The pool committee set its next meeting for late Thursday afternoon.

When the pool committee gives final approval to the document, the plan still must be approved by the Board of Supervisors and the elected officials at at least 80% of the agencies holding at least 90% of the money in the pool. Then U.S. Bankruptcy Judge John E. Ryan must grant it his blessing.

“It’s unfortunate that (the plan is) being held up because the alternative is additional bankruptcies, defaults and extensive litigation, all of which comes at the expense of the taxpayers,” said Todd Nicholson, president of the Orange County Business Council that helped broker the settlement deal. “There really has to be a resolution of the pool plan, it’s really critical. And it has to be resolved in a relatively short period of time.”

Times correspondent Shelby Grad and staff writer Greg Johnson contributed to this report.