SAN FRANCISCO — California Treasurer Bill Lockyer secured a $5.4 billion loan Tuesday from a group of banks in order to avoid borrowing in the open market amid financial chaos if lawmakers in Washington fail to raise the federal debt ceiling.
“California had to obtain this interim financing to protect the state from the immediate, drastic consequences of a failure by Washington to resolve the debt ceiling impasse by the Aug. 2 deadline,” Lockyer said in a statement.
The temporary loan replaces a revenue anticipation note sale of the same amount scheduled for late August.
The treasurer had planned to sell $5.4 billion of revenue anticipation notes to pay for state operations as most tax receipts arrive toward the end of the fiscal year.
The state instead sold “interim” revenue anticipation notes to a group of eight banks to obtain the loan. The yield on the notes is 0.237 and they will mature on Nov. 22, according to the treasurer’s office. It was a competitive bid sale.
Goldman, Sachs & Co. bought $1.47 billion of the notes, with Wells Fargo getting $1.47 billion, Citi $736 million, Barclays $490 million, JPMorgan $490 million, Bank of American Merrill Lynch $245 million, Morgan Stanley $245 million, and U.S. Bank $245 million, the statement said.
The treasurer’s office has said it plans to hold a public Ran sale later in the year to pay off the temporary loan.
In 2010, California took a $6.7 billion bridge loan at a rate of 1.4% to give the state time to prepare a public Ran sale after the state budget was adopted 100 days into the fiscal year. The bridge loan from a group of six financial institutions was repaid after California sold $10 billion of notes in the public markets in November.
In 2009, the state got a bridge loan of $1.5 billion from JPMorgan to help pay off IOUs issued during the cash-flow crisis caused by a delayed budget. The loan was repaid after the state’s traditional Ran sale later that year. It helped the state avoid a potential repeat of October 2008 when it sold $5 billion of Rans at the height of the financial crisis following the collapse of Lehman Brothers and had to offer yields between 3.75% and 4.25% for the short-term notes.
