Barclays, JPMorgan Complete $1 Billion Loan to California
February 23, 2012, 8:53 AM ESTBy Michael B. Marois
(Updates with revenue-bond sale in last two paragraphs.)
Feb. 22 (Bloomberg) -- California sold $1 billion of short- term notes to Barclays Plc and JPMorgan Chase & Co. to pay bills after tax collections in the biggest U.S. state by population trailed budgeted amounts, according to the treasurer’s office.
The banks will earn 0.2 percent interest on the so-called revenue-anticipation notes, Treasurer Bill Lockyer said in a statement. The state will repay the notes by June 30, he said.
The loan was needed after Controller John Chiang said in January that because tax collections trailed budget projections and spending exceeded estimates, the state would face a $3.3 billion cash shortfall by mid-April. It’s the third such sale this fiscal year, which began July 1.
“We’re pleased we’ve completed this part of the cash- management solution,” Tom Dresslar, a spokesman for Lockyer, said in the statement. “We believe we obtained a good deal for taxpayers.”
Lockyer in July secured a $5.4 billion interim loan from Goldman Sachs Group Inc., Wells Fargo & Co., and six other banks and investors. The treasurer took the loan anticipating a possible credit-market disruption as Congress debated raising the nation’s debt ceiling.
Previous Sale
Two months later he borrowed another $5.4 billion through revenue-anticipation notes that were supposed to carry the state through June. State and local governments commonly sell such notes to bolster cash flow until more tax receipts arrive later in the fiscal year. California repaid the interim loan with proceeds from that sale.
The latest loan would be repaid before June 30, though not until after the September notes, which mature June 26.
Earlier this month, lawmakers passed and Governor Jerry Brown signed a bill that lets the state shift $865 million in internal accounts to help avert the cash shortfall. Chiang also has said he temporarily delayed making more than $1 billion in scheduled payments to public colleges, counties and health programs for the poor.
The California Public Employees’ Retirement System, the largest public pension in the U.S., with $235.5 billion of assets, agreed last month to let the state delay making a $527 million payment until April to cover worker benefits.
Lockyer also sold $860 million of taxable revenue bonds today for the University of California. Called “century bonds” because they mature in 100 years, the debt was priced to yield 4.86 percent, or about 165 basis points more than 30-year U.S. Treasuries as of yesterday, Dresslar said in the statement. A basis point is 0.01 percentage point.
Lockyer boosted the size of the sale by $500 million because of demand, Dresslar said.
--Editors: Stacie Servetah, Ted Bunker, Mark Schoifet
To contact the reporter on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net
To contact the editor responsible for this story: William Glasgall at wglasgall@bloomberg.net
