Bloomberg the Company & Products

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

California Prepares $3 Billion Debt Sale of Bonds and Cash Notes

Feb. 14 (Bloomberg) -- California will offer about $2 billion of general-obligation bonds on March 1, the largest sale in four months by the most indebted U.S. state, a spokesman for Treasurer Bill Lockyer said.

Proceeds from the sale will be used to refund outstanding debt, Tom Dresslar, Lockyer’s spokesman, said yesterday. J.P. Morgan Securities LLC, Barclays Capital Inc. and Wells Fargo & Co. will manage the bond sale, Lockyer’s office announced last week.

The state on Feb. 22 will also sell about $1 billion in short-term revenue-anticipation notes to deal with cash-flow needs.

The sales come amid the biggest rally for California debt in two years after Governor Jerry Brown and Lockyer curtailed borrowing to help shrink deficits totaling more than $35 billion since Brown took office in January 2011. The state borrowed $3.3 billion in 2011, the least in four years, last selling tax-exempt debt Oct. 17, when it borrowed $1.8 billion.

The tax-anticipation notes will help Lockyer and Controller John Chiang deal with a $3.3 billion cash shortfall they estimate through the middle of April. Tax revenue hasn’t met forecasts and spending has exceeded projected levels, Chiang said Jan. 31.

California’s debt rating of A- from Standard & Poor’s, the fourth-lowest investment grade, is the lowest of any state. Moody’s Investors Service rates the state A1, the second-lowest after Illinois.

Higher Yield

A California general-obligation bond sold in March 2010 and due in 2022 yielded about 75 basis points more than an index of AAA rated 10-year securities on Jan. 30, according to data compiled by Bloomberg. That’s down from 170 basis points after the sale and less than the 109-point two-year average. A basis point is 0.01 percentage point.

State and local debt of California returned a total of 14.8 percent last year, according to a Bank Bank of America Merrill Lynch index. That’s more than the 11.2 percent for the full $3.7 trillion municipal market, the 9.8 percent for U.S. Treasuries and the 7.5 percent for investment-grade company debt.

It was the third straight year the state’s securities beat all munis since 2008, when they lost 7 percent. Through January, California issues returned 3.3 percent, more than the market, Treasuries and corporate debt, the Merrill indexes show.

To contact the reporter on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.