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CALIFORNIA RANS RATED, GO DEBT LOWERED TO 'AA' BY FITCH -- FITCH FINANCIAL WIRE --

 CALIFORNIA RANS RATED, GO DEBT LOWERED TO 'AA' BY FITCH
 -- FITCH FINANCIAL WIRE --
 NEW YORK, Sept. 25 /PRNewswire/ -- The State of California's $5 billion 1992-93 revenue anticipation notes are rated by Fitch. Series A, $500 million due on Jan. 13, 1993, and Series B, $1 billion due on April 26, 1993, both fixed rate, are rated 'F-1+'. Series C-F, G, H, J, K, $1 billion variable rate demand notes due April 26, 1993, which have a standby bond purchase agreement with a consortium of banks, are rated 'F-1+/F-1+'. Series L, $2.5 billion fixed rate due on May 12, 1993, are rated 'F-1'. The notes are expected by negotiation on Sept. 30 through a syndicate led by Lehman Brothers. The notes are not general obligations but are payable from unapplied moneys in the general fund including transfers and internal borrowings as permitted by law.
 Cash flow for 1992-93 is estimated to be sufficient to cover obligations for the year and reduce year-end internal borrowing considerably, although the general fund will continue to have a cash deficit requiring use of borrowable funds. These borrowable funds will provide the security for note repayment. Wide coverage is available for the January maturity and there is considerable leeway in April, allowing the highest ratings. Borrowable funds are less ample in May and only a small variance from estimates can be tolerated, leading to a somewhat lower rating for the series L notes. Overall the annual cash flow can permit a shortfall of 5 percent and while this year's revenue estimates are more conservative than in the past, the uncertain economy creates vulnerability.
 The state's general obligation bond rating is lowered to 'AA' from 'AA+'. The long-term outlook for California has declined as the recession continues to be deeper than expected and employment loss is very significant, even though the full impact of defense reductions is yet to be realized. The financial position of the general fund at June 30, 1992, was poor and budget adoption was protracted. Balance for 1992-93 has been sought largely through expenditure cuts but, even if the plan succeeds, there will be a de facto deficit from a loan of nearly $1 billion to school districts which is outside the budgetary accounts. The state's adjustment to a changing economic and financial environment may have to extend over a lengthy period and will be complicated by the restrictive effects of requirements resulting from initiative measures. In connection with this action, the ratings assigned to state-supported obligations of several agencies are revised to 'A+' from 'AA'. The credit trend for the state is now considered uncertain.
 A complete list of California ratings removed from FitchAlert:
 State of California G.O. AA
 Los Angeles St. Bldg. Auth. (St. of California
 Dept. of Gen. Serv. Lease) A+
 Regents of University of California (Chiller/
 Cogeneration Facility) COPs Ser. 1991 A+
 State Public Works Board
 Calif. Comm. Colleges Lease Rev. Bonds Ser. 1991A A+
 Department of Corrections
 Southern Maximum Security Complex
 Lease Rev. Bonds Ser. 1985A A+
 State Prison-Amador County Lease Rev.
 Bonds Ser. 1986A A+
 State Prison-Corcoran Lease Rev. Bonds
 Ser. 1986A A+
 State Prison-Del Norte Lease Rev. Bonds
 Ser. 1987A A+
 State Prison-Madera County Lease Rev. Bonds
 Ser. 1990A A+
 State Prison-Imperial County Lease Rev.
 Bonds Ser. 1991A A+
 Energy Efficiency Rev. Bonds Ser. 1986A & 1991A A+
 Franchise Tax Board (Central Office Proj.-Phase II)
 Lease Rev. Bonds Ser. 1991A A+
 Regents of University of California
 High Technology Facil. Lease Rev. Bonds
 Ser. 1986A A+
 High Technology Facil. Lease Rev. Bonds Ser.
 1987A A+
 High Technology Facil. Lease Rev. Bonds Ser.
 1988A A+
 Lease Rev. Bonds Ser. 1990A A+
 Trustees of California State University
 High Technology Facil. Lease
 Rev. Bonds Ser. 1986A A+
 Lease Rev. Bonds Ser. 1990A A+
 Lease Revenue Bonds, 1992 Ser. A (Various CSU
 Projects) A+
 -0- 9/25/92
 /CONTACT: Claire G. Cohen, 212-908-0552. or Richard Raphael, 212-908-0506, both of Fitch/ CO: ST: California IN: SU: RTG


AH -- NY061 -- 3686 09/25/92 17:49 EDT
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Date:Sep 25, 1992
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