Posted on 09/27/2002 11:05:45 PM PDT by Ernest_at_the_Beach
Edited on 07/19/2004 2:10:41 PM PDT by Jim Robinson. [history]
Sacramento, California, Sept. 27 (Bloomberg) -- California will start selling the biggest issue of municipal bonds in U.S. history, $11.9 billion, the week of Oct. 21, said Treasurer Philip Angelides.
The bonds will repay the state for the costs it incurred during last year's power crisis and pay off bank loans. The sale will come right after the state sells as much as a record $12.5 billion in notes to make up for lower tax collections.
(Excerpt) Read more at quote.bloomberg.com ...
 California Laws for Sale calgov2002: for old calgov2002 articles. calgov2002: for new calgov2002 articles. Other Bump Lists at: Free Republic Bump List Register |
Calpowercrisis:
| To find all articles tagged or indexed using Calpowercrisis, click below: | ||||
| click here >>> | Calpowercrisis | <<< click here | ||
| (To view all FR Bump Lists, click here) | ||||
A 4.75 percent tax-free yield translates into a taxable equivalent return of 8.53 percent for a California resident in top federal and state income tax brackets.
California's water department may pay more than other borrowers to find buyers, and to compensate them for the risks of an untested financing mechanism, according to investors. Bonds backed by the states' share of the tobacco settlement, for example, have yielded more than 6 percent.
So most folks are paying 4.75 % on tax exempt bonds, yet the California Tabaco bonds yeilded more than 6%. This is when to a highly taxed Californian, the 4.7 is the equivalent of an 8.53 taxable issue. This means that the 6% that the tabaco bonds are yeilding is equivalent to nearly 10% on a taxable basis to a high income tax bracket Californian.
The state of California is having to pay a serious premium over market! I wonder what a BBB+ will require?
The part that bothers me is that half this dept will mature in one year. What do we do then, roll it over again?
By law California must have a balanced budget. The sale of these bonds won't do that. Well be taking on debt. Why isn't this an issue in the election?
Hopefully it will be soon.
What does this mean--"part of the sale will be insured against default"? Does it mean that part of the sale WON'T be insured against default?
Help Robert, snopercod!
Most municipal bonds are bought by commerical investors who have differing credit rating needs for their portfollios. Most municipals don't have a AAA rating. As such there are sometimes market demands for AAA rated bonds that the typical municipal market can not match. Some large bond insurance companies will come in and for a fee from the issuer guarantee a set of bonds against default. In the determination of whethere to get or not get such insurance an issuer, like the state of California, needs to examine what the cost of the insurance will be over the lower interest rate savings.
My read is that the people issuing the California bonds are trying to create as large a market as humanly possible for their bonds. The companies and folks who will be most interested in the power bonds will be those that pay California income taxes. California will have variable interest rate, taxable, and guaranteed and non-guarenteed bonds. I would also expect that Calfifornia will have a variety of lenghts of the bonds, that they won't all be 20-year bonds.
What the people issuing the power bonds are trying to do is to tap into as large a market as possible so they get them all sold at reasonable costs. That is why they are not selling all vanilla, 20-year, tax-exempt non guarenteed bonds.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.