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CALIF. PUBLIC WORKS BOARD $72 MILLION BONDS RATED 'A+' BY FITCH -- FITCH FINANCIAL WIRE --

 NEW YORK, April 19 /PRNewswire/ -- The State Public Works Board of the State of California's $72 million (approximately) Lease Revenue Bonds (The Regents of the University of California) 1994 Series A (Various University of California Projects) are rated 'A+' by Fitch. The bonds will be sold through negotiation with a syndicate led by E. J. De La Rosa & Co., Inc. during the week of April 25. The credit trend is declining.
 The rating is supported by the University of California (UC) system's position as one of the pre-eminent public universities in the nation, strong student demand, and the Regents' maintenance of strong financial results and balance sheet despite significantly reduced state appropriations. The rating also is based on California's credit prospects, as the economy and accordingly the state's financial operations fail to meet expectations. The declining trend reflects lower financial projections for this year, increasing pressure on next year's budget to eliminate the deficit, and growing reliance on external operating borrowing.
 Proceeds will finance three education buildings at three of UC's nine campuses. Legal provisions are strong, with the Regents covenanting to take all action necessary to include the lease payment in its annual budget. The Regents pledges to use all lawfully available funds, including state appropriations, its largest revenue source. From a practical standpoint, state funds will be the payment source, since a statute requires that the first dollars appropriated by the state be used to pay lease rentals to the board. However, the Regents' ability to make payments is not contingent on the state's budget enactment; twice recently, the Regents made lease payments without the state's having enacted a budget. State appropriations account for 24% of the university's $7.2 billion fiscal 1994 operating revenue, excluding certain federal research payments. The structure allows for a pooled debt service reserve fund to be shared by these bonds and three prior issues, if the board approves a new master indenture. The board is meeting this Friday to consider the new indenture.
 The state's economy and financial operations are still failing to meet expectations. Revenues and expenditures for the current fiscal year each exhibit a 2% negative variance, decreasing the projected operating surplus to $400 million from $2.1 billion. This result significantly increases fiscal 1995's deficit elimination burden. The governor's fiscal 1995 proposed budget acknowledges this year's below-budget performance and attempts to adhere to the 18-month deficit elimination plan. The budget produces an operating surplus sufficient to eliminate the deficit and end the year with a small, $260 million balance. However, the budget assumes receipt of $2 billion in federal aid for immigrant-related expenses, well above the level received to date.
 -0- 4/19/94
 /CONTACT: Amy S. Doppelt, 212-908-0514 or Claire G. Cohen, 212-908-0552, both of Fitch/


CO: ST: California IN: SU: RTG

WB -- NY116 -- 8227 04/19/94 16:00 EDT
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Date:Apr 19, 1994
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