SAN FRANCISCO — With legislation in the works designed to help California manage its choppy cash flows, the state is preparing to return to the long-term municipal bond market.
The state scheduled a March 4 pricing for approximately $2 billion of tax-exempt general obligation bonds. Morgan Stanley and JPMorgan are the book-runners.
The institutional pricing will follow a two-day retail order period, including California’s now-customary radio and print advertising campaigns targeting retail investors, said Tom Dresslar, spokesman for Treasurer Bill Lockyer.
Later in March, the treasurer’s office plans a taxable GO sale, with a Build America Bond component, also in the $2 billion range, Dresslar said.
The treasurer’s office is proceeding in the expectation that a cash-flow management bill will clear the Legislature next week. That legislation is designed to designate more authority to state budget and finance officials to manage the timing of payments for various state programs.
“One of the fiscal management defects that the rating agencies always harp on is the lack of agility California has when it comes to dealing with budget and cash-flow emergencies,” Dresslar said. “We believe that this legislation will be a significant step to addressing that concern, at least through the next fiscal year. We think it should be viewed very favorably by rating agencies and investors.”
California GOs carry underlying ratings of BBB from Fitch Ratings, Baa1 from Moody’s Investors Service, and A-minus from Standard & Poor’s — the lowest for any state.
The state’s cash-flow problems were highlighted in the summer of 2009, when the controller’s office issued more than $2 billion of IOUs to a variety of creditors to preserve cash for creditors with higher legal and constitutional protections, such as bondholders.
The IOUs were redeemed after lawmakers adopted budget revisions that eased the cash crunch, and allowed the state to go to market with $8.8 billion of short-term revenue anticipation notes.
California last issued GOs in early November, selling $1.3 billion of tax-exempt GOs and $908 million of taxable BABs.
