Reuters
UPDATE - California to sell up to $7 billion in bonds May 4
Thursday April 15, 3:34 pm ET
By Linda Prospero
NEW YORK, April 15 (Reuters) - California will sell up to $7 billion in bonds on May 4, the state treasurer said on Thursday, as part of $12.3 billion in debt sales it plans this fiscal year to relieve a cash crunch.
Treasurer Phil Angelides said in a conference call that between $6 billion and $7 billion of fixed-rate bonds would be formally sold on Tuesday, May 4, preceded by a retail order period beginning on Friday, April 30.
The state also plans to sell another $5 billion to $6 billion in economic recovery bonds between May 24 and June 15, Angelides said in a conference call.
Although voters approved up to $15 billion in bond issuance, Republican Gov. Arnold Schwarzenegger's budget calls for about $12.3 billion. The remaining $2.7 billion in debt could be used to help the state with next year's budget, if the legislature authorized it, Angelides said.
The treasurer emphasized that the bond sale would provide only a short-term fix to pay off upcoming debts, but would do nothing to remedy the state's structural gap between expenses and revenues.
The bond sale process is being handled as quickly as possible to give the state the cash, coupled with funds already on hand, needed to repay $11 billion in revenue anticipation warrants due June 16 and $3 billion in revenue anticipation notes due June 23, he said.
The first series of bonds would be fixed-rate debt, he said, although subsequent series would contain both fixed-rate and variable-rate bonds in order to reach the widest possible audience of buyers.
The bonds would be backed by a 1/4 cent sales tax and also represent a pledge of the state's full faith and credit, essentially making them general obligation bonds, the treasurer said.
The bonds are expected to have a nominal maximum maturity of 18 years, based on conservative assumptions, Angelides said.
If sales tax revenues grew at a historical rate of 5 percent and if Schwarzenegger and the legislature set aside new "rainy-day" funds to speed up bond payments, the debt could be paid off in 9-1/2 years, he said.
The state's Economic Recovery Bond Finance Committee is slated to meet on April 20 to formally approve the bonds. |
