ALAMEDA, Calif. — California delayed Wednesday’s scheduled institutional pricing of $10 billion in revenue anticipation notes until Thursday, citing a late-breaking lawsuit challenging part of the recently adopted state budget, which will require updates to the bond offering documents.
Because of the delayed Ran sale, the scheduled pricing of $2 billion of long-term general obligation Build America Bonds will also be put off to Friday from Thursday.
The lawsuit, filed Tuesday in state court, challenges a deal in which California plans to sell 11 state office properties to private investors, and then lease back the office space.
Lawmakers assented to the deal — which is expected to generate $1.2 billion up front for the general fund, —when they approved this year’s state budget in October.
The Ran pricing delay simply gives the state time to update its disclosures to reflect the lawsuit, said Tom Dresslar, spokesman for state Treasurer Bill Lockyer.
California took $5.89 billion in retail orders for the notes Monday and Tuesday.
Those who have placed retail orders have the option to cancel them in light of the new disclosure, but the state is also extending the retail order period until 8 p.m. Eastern Standard Time Wednesday, and will price the deal for institutions Thursday.
The retail pricing guidelines for the deal — 1.25% for the May 2011 maturity and 1.5% for the June maturity — remain unchanged, Dresslar said.
“Even if this lawsuit succeeds in creating a $1.2 billion hole in the budget, the state’s still going to have ample cash resources to repay the Rans on time and in full,” Dresslar said.
Standard & Poor’s issued a bulletin Wednesday morning saying the lawsuit, and its potential $1.2 billion impact on the state budget, does not affect its SP-1 rating on the notes.
“Our assessment of the state’s cash flow and ability to retire the notes later in the year included consideration of scenarios in which these and certain other revenues did not materialize as cash,” the bulletin said.
California’s plans to price $1.75 billion in tax-exempt GO bonds on Tuesday are unchanged, Dresslar said.
