ERBs Get Three Affirmations

All three ratings agencies have affirmed California’s economic recovery bonds ahead of a $3.2 billion issue next week.

The bonds — issued to finance the state’s budget deficit — were affirmed at AA-plus by Standard & Poor’s and Aa3 by Moody’s Investors Service yesterday, and AA-minus Wednesday by Fitch Ratings. All the agencies assign a stable outlook.

The actions affect about $7.2 billion of outstanding bonds, in addition to next week’s new issue. Lehman Brothers will run the books on the deal, which is slated to price Thursday after a retail order period Tuesday and Wednesday.

The bonds will be the final new-money issuance from a $15 billion deficit bond authorization by the state’s voters in 2004. The economic recovery bonds are backed by a dedicated quarter-cent sales tax, a security that gives them a higher credit rating than California GOs, which are at the A-plus level.

Standard & Poor’s has placed a higher rating on the credit since September 2006, when it upgraded the economic recovery bonds two notches as part of a broad-based review of its criteria for bonds backed by dedicated taxes. The possibility that California would issue the remaining economic recovery bond authorization was factored into that upgrade, said analyst David Hitchcock.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER