MNeagle
26th October 2010, 04:22 PM
California borrowed $6.7 billion from JPMorgan Chase & Co. and five other banks to pay delinquent bills that piled up during the state’s record-length budget impasse, Treasurer Bill Lockyer said.
California, the largest U.S. issuer of municipal debt, agreed to pay 1.4 percent to the banks, which also include Goldman Sachs Group Inc., for the bridge loan, Lockyer said. He will repay the debt in about two weeks when he sells an estimated $10 billion of revenue anticipation notes, a short- term municipal bond the state offers when cash is low and repays from later tax collections.
The so-called bridge loan was needed after the most populous state racked up $8.4 billion of bills that couldn’t be paid in the 100 days California was without a budget. Governor Arnold Schwarzenegger signed the spending plan Oct. 8 after lawmakers agreed on steps to eliminate a $19 billion deficit brought on by the recession.
As part of the plan, lawmakers delayed about $5 billion of subsidies for schools and colleges until later in the year, to ease the cash crunch.
The bridge loan is California’s second in as many years. Lockyer borrowed $1.5 billion in August 2009 from JPMorgan at an annual interest rate of 3 percent after a similar budget impasse forced the state to issue IOUs to pay some bills. The loan was repaid when Lockyer sold $8.8 billion of short-term notes a month later and used some of the proceeds to repay the debt.
JPMorgan’s $3.125 billion loan was the largest of the group, followed by Goldman Sachs’s $1.5 billion. Wells Fargo & Co. lent $1 billion, followed by $500 million from Citigroup Inc., $325 million from Morgan Stanley and $250 million from the Golden 1 Credit Union. The loans mature in January.
http://www.bloomberg.com/news/2010-10-26/california-borrows-6-7-billion-cash-from-jpmorgan-led-group.html
California, the largest U.S. issuer of municipal debt, agreed to pay 1.4 percent to the banks, which also include Goldman Sachs Group Inc., for the bridge loan, Lockyer said. He will repay the debt in about two weeks when he sells an estimated $10 billion of revenue anticipation notes, a short- term municipal bond the state offers when cash is low and repays from later tax collections.
The so-called bridge loan was needed after the most populous state racked up $8.4 billion of bills that couldn’t be paid in the 100 days California was without a budget. Governor Arnold Schwarzenegger signed the spending plan Oct. 8 after lawmakers agreed on steps to eliminate a $19 billion deficit brought on by the recession.
As part of the plan, lawmakers delayed about $5 billion of subsidies for schools and colleges until later in the year, to ease the cash crunch.
The bridge loan is California’s second in as many years. Lockyer borrowed $1.5 billion in August 2009 from JPMorgan at an annual interest rate of 3 percent after a similar budget impasse forced the state to issue IOUs to pay some bills. The loan was repaid when Lockyer sold $8.8 billion of short-term notes a month later and used some of the proceeds to repay the debt.
JPMorgan’s $3.125 billion loan was the largest of the group, followed by Goldman Sachs’s $1.5 billion. Wells Fargo & Co. lent $1 billion, followed by $500 million from Citigroup Inc., $325 million from Morgan Stanley and $250 million from the Golden 1 Credit Union. The loans mature in January.
http://www.bloomberg.com/news/2010-10-26/california-borrows-6-7-billion-cash-from-jpmorgan-led-group.html