Tom Petruno | Money & Co. blog | LA Times
6:09 PM, February 4, 2009
One day after California's credit rating fell to the lowest of any state, investors on Wednesday stepped up to buy $950 million of tax-free bonds from the Los Angeles Unified School District.
The sale suggests that demand for municipal securities remains relatively healthy, even for debt of issuers that could be adversely affected by California’s budget woes.
The voter-approved LAUSD bonds, which will finance school building projects, were sold in terms from one to 25 years. The annualized tax-free yield on the five-year issue was about 2.69%. The 10-year bond's yield was about 3.84%.
By contrast, market yields on 10-year state general obligation bonds have been around 4% in recent days.
"We're pleased with the interest rates, given the state of the state," said Tim Rosnick, a finance officer for LAUSD.
LAUSD, which has a remaining backlog of $11 billion in infrastructure bonds to issue, has a higher credit rating than California. Standard & Poor's rates the district "AA-minus."
S&P cut the state's debt grade to "A" from "A-plus" on Tuesday, citing the continuing budget impasse in Sacramento. California had been tied with Louisiana for the lowest credit rating among the states, but now is all alone at the bottom.
The state's grade still is above the "BBB" rating it had from mid-2003 to March 2004, amid the last big budget debacle. That was when Gov. Gray Davis was recalled, which brought Gov. Arnold Schwarzenegger to power.