California#s Estimated $2.3 billion GO Bonds Assigned #AA-# Rating

Stocks and Financial Services Press Releases Thursday February 25, 2016 10:08
SAN FRANCISCO--25 Feb--Standard & Poor's

SAN FRANCISCO (Standard & Poor's) Feb. 24, 2016--Standard & Poor's RatingsServices assigned its 'AA-' long-term rating, and stable outlook, to California's estimated $2.3 billion of general obligation (GO) bonds. The issue consistsof $830 million in tax-exempt various purpose GO bonds, $65 million intax-exempt GO school facilities bonds, and $250 million in tax-exempt GO putbonds. In addition, the state plans to issue approximately $1.2 billion intax-exempt GO refunding bonds.

At the same time, Standard & Poor's affirmed its 'AA-' long-term ratings andunderlying ratings (SPURs) on California's $75.3 billion of GO bondsoutstanding, as of Jan. 1, 2016. In addition, we affirmed our 'A+' long-termratings and SPURs on the state's $10.8 billion of lease revenueappropriation-backed debt. The outlook on all ratings is stable.

Finally, we affirmed the long-term component of the 'AAA/A-1+' and 'AAA/A-2'ratings on some of the state's GO variable-rate demand bonds. The long-termcomponent of the ratings is based jointly (assuming low correlation) on thatof the obligor, California, and the various letter of credit (LOC) providers.The short-term component of the ratings is based solely on the ratings on theLOC providers.

"The GO ratings are based on our view of the state's diverse and expandingeconomy, demonstrated commitment in five consecutive budgets to aligningrecurring revenues and expenses while paying down budgetary debts, and goodand increasing budgetary reserve levels," said Standard & Poor's creditanalyst Gabriel Petek.

The GO put bonds have a nominal final maturity in 2031 but will be subject toa mandatory tender date, pending market conditions at the time of the bondsale. A failed remarketing of the mandatory tender bonds on the put date willnot result in an event of default, but a stepped-up interest rate.

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