Thursday July 2, 07:48 PM
UPDATE 2-Cash-strapped California sets interest rate on 'IOUs'
SAN FRANCISCO, July 2 (Reuters) - California officials, facing a cash crisis without a state budget agreement, approved on Thursday a 3.75 percent interest rate and an October 2 maturity date for registered warrants, or 'IOUs,' the
state will issue in lieu of payments to vendors, local agencies and individuals.
The first tranche of IOUs will be printed Thursday afternoon and will be sent primarily to taxpayers owed tax refunds, according to State Controller John Chiang's office.
'We anticipate printing about 28,742 registered warrants today worth about $53.3 million,' said Jacob Roper, a spokesman for Chiang, whose office pays the state government's bills.
Chiang plans to issue $3.36 billion in IOUs this month so the state government has cash available for $10.9 billion for priority payments, including money owed to investors holding California's debt.
California's finance officials, including Chiang, State Treasurer Bill Lockyer and Department of Finance Director Michael Genest, aim to reassure Wall Street as the state's cash dwindles without a budget agreement in place -- and in anticipation of having to sell $7 billion to $9 billion in short-term debt after a spending plan is approved.
'Absent a credible budget revision package, we believe the state may suffer insufficient investor confidence in its finances to successfully place such an offering,' Standard & Poor's said in a statement on Wednesday.
S&P also affirmed its A rating on California's general obligation debt, but kept it on CreditWatch with negative implications.
'Should the current impasse over a budget revision remain unresolved long enough that the state's cash management actions no longer are sufficient to effectively insulate its priority payments -- including debt service -- the state's GO rating will likely be lowered, possibly to below 'A-',' S&P warned.
Gov. Arnold Schwarzenegger declared a fiscal emergency on Wednesday to force lawmakers to tackle California's financial crisis after they failed to agree on a plan to balance the state's budget -- now showing a deficit of $26.3 billion -- in time for the new fiscal year. It began on Wednesday.
(Reporting by Jim Christie; Additional reporting by Marianne Russ in Sacramento, California; Editing by Padraic Cassidy)
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View
