State seeks short-term loan from Wall Street

Los Angeles Times - - Daily Market Roundup - Tom Petruno tom.petruno@latimes.com

Cal­i­for­nia said it was talk­ing with Wall Street banks about a short-term loan of about $5 bil­lion to help re­plen­ish the state’s cash cof­fers once a bud­get agree­ment is reached in Sacra­mento.

The loan, which could be highly profitable for the banks, would be re­paid within about four weeks via “rev­enue an­tic­i­pa­tion notes” that the state would sell to in­di­vid­ual and in­sti­tu­tional in­vestors.

The bank deal could en­able the state to be­gin mak­ing pay­ments to the long list of cred­i­tors that have been stiffed since July 1, when the fis­cal year be­gan with­out a bud­get deal.

Trea­surer Bill Lock­yer’s of­fice said Mon­day that the state was ne­go­ti­at­ing with JPMor­gan Chase, Bank of Amer­ica, Gold­man Sachs and other big banks for the loan. The to­tal bor­rowed de­pends on what the state fi­nance depart­ment es­ti­mates its near-term cash needs will be, said Joe De Anda, a spokesman for Lock­yer.

“It could be less or it could be more” than $5 bil­lion, he said.

In Au­gust 2009, the state bor­rowed $1.5 bil­lion from JPMor­gan Chase at an an­nu­al­ized in­ter­est rate of 3%, a hefty re­turn to the bank. That sum was re­paid a month later when the state sold $8.8 bil­lion in rev­enue an­tic­i­pa­tion notes to in­vestors at tax-free rates as low as 1.25%. The notes ma­tured the fol­low­ing May and June.

The state nor­mally bor­rows via short-term notes in au­tumn to tide it over un­til tax rev­enue ar­rives later in the fis­cal year. But Lock­yer can’t bor­row money un­til a bud­get deal is reached.

Late last week, Gov. Arnold Sch­warzeneg­ger said he and leg­isla­tive lead­ers had reached “a frame­work of an agree­ment” on elim­i­nat­ing the state’s $19.1-bil­lion deficit and end­ing the bud­get stale­mate. Talks con­tin­ued Mon­day.

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