SAN FRANCISCO - California sold $2.8 billion of revenue anticipation notes in a competitive offering on Wednesday at a record-low yield, according to the state treasurer's office.
The state achieved its lowest ever weighted average net interest cost on a RAN sale at 0.107%. The state set its previous low last year with its $5.5 billion RAN sale, which priced at 0.21% for a May 2014 maturity and 0.23% for a June 2014 maturity.
"This was an outstanding result, and that almost seems like an understatement given the numbers," State Treasurer Bill Lockyer said in a statement. "It shows what you can do in the market with a demonstrated commitment to sound budgeting and sustained fiscal discipline."
California sells RANs each year to cover seasonal cash flow imbalances that occur during the fiscal year. The notes are rated MIG1 by Moody's Investors Service, SP-1+ by Standard & Poor's, and F1 by Fitch Ratings.
The RANs will mature on June 22, 2015.
According to the treasurer's office, the deal was oversubscribed five times, with 16 broker-dealers submitting 76 bids for $16.935 billion of RANs.
The state awarded the RANs starting with the lowest bid and moving up until the $2.8 billion amount was reached. Ten broker-dealers were awarded, including $1 billion to Morgan Stanley, $688 million to JPMorgan, and $400 million to Goldman Sachs.
The other winning bidders included US Bancorp, RBC Capital, Bank of America Merrill Lynch, Wells Fargo, Jefferies, FTN Financial Capital, and Stifel Nicolaus.
Wednesday's offering was the state's first competitively bid RAN deal since 1997, and the smallest one since the $1.5 billion cash-flow borrowing in fiscal year 2006-07.
The treasurer's office said the smaller size reflects the state's improved budget and liquidity condition.
"Given the state's markedly stronger credit standing and the low interest rate environment, STO officials determined a competitively bid sale would bring taxpayers lower interest rates than a negotiated transaction," according to the treasurer's office. "The results evidenced the wisdom of that decision."
The state has several more debt offerings planned for this month, including a $100 million veterans general obligation bond sale on Sept. 18, a $2.3 billion GO bond sale on Sept. 23, and a $625 million water system revenue bond sale on Sept. 30.
California's GO bonds are rated Aa3 by Moody's and A by both Standard & Poor's and Fitch Ratings.
