Even as it confronts a federal investigation that’s embroiled its chief executive, Chicago’s public school system is facing the prospect of having to make payments to four financial institutions that would largely wipe out its cash reserves.

And they could demand those payments with just 48 hours’ notice, records examined by the Chicago Sun-Times show.

Investment bankers who entered into risky transactions with the Chicago Board of Education called debt swaps could demand payment of an estimated $228 million, documents the district filed with federal financial regulators show.

That possibility was triggered by the school system being hit with a dramatic downgrade in its credit rating last month.

As a result, the financial institutions can end the deals and demand termination payments within “two business days following notice of the amount payable,” the Chicago Board of Education said in a regulatory filing Friday.

“No one has demanded termination payments,” Chicago Public Schools spokesman Bill McCaffrey said Friday.

But school officials so far haven’t been able to renegotiate the terms of the swaps and free themselves of that threat.

“While those discussions are expected to continue, there can be no guarantee that amendments will be successfully negotiated,” the school district said in the regulatory filing, adding that the $228 million figure is based on “market valuations as of March 19” and “may be higher.”

If the investment banks decide to terminate the deals, the district “currently has” enough money to pay the termination fees, but the payments would leave CPS virtually broke, records show. They would eat up more than the $227 million projected to be left in the school system’s main reserve fund after this school year.

CPS has another $174 million in a “debt-stabilization fund.” But without specifying how long that money would last, school officials warned they are on the verge of tapping out their reserves.

“No assurance can be given . . . regarding the board’s future liquidity position,” school officials said in the filing with regulators.

The worsening financial straits come as CPS could be on the verge of a change in leadership. Barbara Byrd-Bennett — whose contract as CPS’ chief executive officer is set to expire at the end of June — agreed Friday to take a leave of absence. CPS officials said Friday federal investigators have asked for records pertaining to Byrd-Bennett, her close aides and an education consulting company she formerly worked for that was given a $20.5 million, no-bid contract with the district.

Chicago schools CEO Barbara Byrd-Bennett with Mayor Rahm Emanuel in 2012.  AP file photo

Chicago schools CEO Barbara Byrd-Bennett with Mayor Rahm Emanuel in 2012. AP file photo

Also, CPS has landed for the first time on the Illinois State Board of Education’s financial “watch list” — with 37 other financially troubled school systems. In releasing the list last month, state officials noted “the district has been deficit-spending for the last two fiscal years and had only eight days’ cash on hand” as of June 30, 2014.

CPS blames its money troubles largely on rising pension costs. Its pension payout this school year has skyrocketed to $700 million — up from $200 million in 2012-13.

“Our drop into the ‘Financial Watch’ category is the direct result of this escalating pension cost,” CPS officials told the state education agency. “We will continue to see our financial condition deteriorate as long as we face nearly flat or declining state revenues with pension payments that now make up 13 percent of our revenues and continue to grow.”

Even without having to make the payments to end the swap deals, the district could soon run out of cash. Only $227 million is left in CPS’ main reserve fund after using $862 million to balance its budget this year, records show.

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Despite closing a record 50 schools in 2013, the district is spending nearly $5.8 billion this school year. That far outstrips its total revenues, of less than $4.9 billion.

And the shortfall for the coming budget year, starting July 1, is forecast to top $1 billion.

No one can guarantee what future spending will be, especially given that CPS’ contract with the Chicago Teachers Union — whose members went on strike in 2012 — is set to expire after the current school year.

Even though Wall Street credit-rating agencies downgraded the school system’s credit rating last month to just one notch above so-called junk status, making it likely it will cost more to borrow money, CPS is preparing to do that this week. It plans to go to the bond market to borrow $296 million. The money is to pay for recently completed projects including playgrounds, air-conditioning systems and a program to reduce energy use in schools.

The swap deals that now threaten CPS’ reserves were made to protect against fluctuating interest rates on bond payments. The Chicago Board of Ed entered into the swap agreements beginning 10 years ago, essentially gambling the deals would help ensure they had the money to pay back bond-holders.

Had interest rates risen, the schools would have saved money. But rates have fallen.

The terms of the swaps required the school system to maintain a minimum bond rating. But CPS fell below that threshold with last month’s three-notch downgrade from the credit-rating agency Fitch Ratings, allowing the bankers to demand payment based on the current value of the deals.

The largest amount — nearly $120 million — would be owed to Royal Bank of Canada, based in Toronto.

More than $60 million would be due to Loop Financial Products I LLP, headed by James Reynolds Jr., an appointee of Mayor Rahm Emanuel to the boards of World Business Chicago and the Illinois Sports Facilities Authority.

CPS would have to pay Bank of America, which is headquartered in Charlotte, N.C., about $47 million.

And Merrill Lynch, owned by Bank of America, would be owed an estimated $587,000.

Bank of America and Royal Bank of Canada officials wouldn’t comment. Reynolds representatives did not return calls.

City Hall also has engaged in swap deals, and it, too, could have faced having to pay hundreds of millions of dollars after the city’s bond rating was downgraded. But the city so far has avoided having to do that, with the Emanuel administration having renegotiated all but one of the deals. That lowered the threshold that would allow its bankers to end the deals.

City Hall still could be on the hook for about $40 million to Wells Fargo if it exercises its right to terminate one swap deal. Wells Fargo officials wouldn’t comment.

But Sue Hofer, a city budget department spokeswoman, said, “They’ve agreed not to take immediate action.”

Even if the financial institutions don’t demand the termination payments from CPS, the school system appears to have few options for digging itself out of the projected $1.1 billion shortfall next year. The state is struggling with its own pension crisis, so big increases in funding from Springfield appear unlikely.

State law caps school property-tax increases at 5 percent a year or the rate of inflation, whichever is less. Chicago school officials could ask voters for permission to raise taxes more than that — with little likelihood of success.

Emanuel plans to release surplus money from the city’s tax-increment financing districts — where property taxes are supposed to be spent on infrastructure and development projects within those zones. But over the past three years, those surpluses have provided CPS no more than $32 million a year.

Gov. Bruce Rauner has suggested CPS could declare bankruptcy, allowing it to restructure its debts and contracts with the teachers union and others. But state law bars most local governments, including CPS, from seeking bankruptcy protection. And CPS officials say bankruptcy isn’t a strategy school officials plan to pursue, echoing previous comments by Emanuel.

On Friday, Chicago Board of Education Vice President Jesse Ruiz was appointed to replace Byrd-Bennett on an interim basis.

“I spent six and a half years in Springfield and have great relationships still,” said Ruiz, a former chairman of the state board of education who said he hopes to work with lawmakers to get help with CPS’ financial mess. “Those will be critical, and I hope to work for the betterment of Chicago’s schoolchildren over the next several months.”