Money & Company
Tracking the market and economic trends that shape your finances.
September 1, 2011 | 7:06 pm

California on Thursday got the highest possible credit ratings on the short-term debt it plans to issue the week of Sept. 12. That’s should be good for taxpayers, at the expense of the investors who are expected to buy the securities.

Standard & Poor’s rated the debt SP-1+, the first time California has received that top-rung rating from S&P since 2007, Treasurer Bill Lockyer said.

Moody’s Investors Service also gave the debt the highest possible rating, at MIG-1.

The state expects to raise $5.4 billion via the sale of so-called revenue anticipation notes, or RANs. Lockyer will use the money to pay off a bank loan the state took out in late July.

California and many other state and local governments issue RANs at this time of year to bridge the gap between their cash needs and the arrival of tax revenue later in the fiscal year. California’s notes will mature in late spring of next year.

Lockyer Lockyer had planned to sell RANs in August. But fearing that the debate in Washington over the federal debt ceiling might rile financial markets, he chose to borrow first from major banks to have the money in hand, and sell notes later to retire the bank loan.

Credit rating firms typically grade RAN debt based on the amount of cash the borrowers are expected to have on hand when the securities mature. Moody’s said in a statement Thursday that it expected the state to have cash “sufficient to repay the notes with moderate additional cushion, even in the case of [budget] stress scenarios run by Moody’s.”

Gov. Jerry Brown lauded the ratings decisions, calling them “a strong indication that our state’s finances are on the right track. Despite the uncertain economy, I intend to do everything possible to keep state revenues and spending in balance.”

California borrowed $10 billion via RANs last November and had to pay dearly because of upheaval in the municipal debt market at the time. Investors were dumping muni securities nationwide because of worries about state and local governments’ finances.

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