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California GO's lowered to BBB credit rating

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posted on Jul, 6 2009 @ 03:37 PM

by Fitch. Maintains negative outlook.

One more notch down and they will loose their "investment grade" status and it will force a HUGE number of pension funds, etc. to dump them.

posted on Jul, 6 2009 @ 03:48 PM

GO's = General Obligation Bonds.

posted on Jul, 6 2009 @ 06:23 PM
Another article:

California Credit Rating Cut Close to Junk After IOUs (Update2)

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By William Selway

July 6 (Bloomberg) -- California’s credit rating was cut for the second time in as many weeks by Fitch Ratings after a stalemate over how to close a $26 billion budget deficit forced the most-populous U.S. state to pay some bills with IOUs.

Fitch lowered its rating of California’s general obligation bonds by two steps to BBB from A-, placing the debt two ranks above so-called high-yield, high-risk junk ratings, and said the state may be cut further. The credit-rating company last lowered its assessment of California on June 25.

California, the largest issuer of municipal bonds, last week began issuing IOUs for the second time since the Great Depression as Governor Arnold Schwarzenegger and lawmakers remained deadlocked over the budget cuts needed to make up for revenue lost because of the recession. California Controller John Chiang said the step was needed to conserve cash.

“The downgrade to ‘BBB’ is based on the state’s continued inability to achieve timely agreement on budgetary and cash flow solutions to its severe fiscal crisis,” Fitch said in a statement.

California, with the world’s eighth-largest economy, was already the lowest-rated U.S. state. Standard & Poor’s gives the state it’s A grade, the sixth-highest of 10 investment levels. The firm reaffirmed that assessment on July 1. Moody’s Investors Service rates the debt A2 and placed it on watch on June 19.
(more at link)

posted on Jul, 6 2009 @ 07:00 PM
Fitch is probably the most reputable of the credit reporting agencies. I believe that there is something different in how they are compensated for rating companies than their larger competitors Moody's and S&P.

Moody's and S&P are known to only downgrade from AAA a couple of days after default LOL!

posted on Jul, 6 2009 @ 07:31 PM
The Feds are just waiting for California to come begging on their knees and are willing to give up all their state's rights for a bailout.

I hope California congress get's it's s* together quick. Kudos to Arnold for not raising taxes and holding out.

posted on Jul, 6 2009 @ 10:59 PM
This is a fast train running.

Only 10 days ago Fitch lowered CA's credit rating from "A" to "A-".

Reminder again, if CA's credit rating is lower simply one more notch they will lose their "investment grade" status.

HUGE numbers of pension funds, etc. out there are required to maintain only "investment grade" products. Should CA lose this status is will result in billions upon billions of their bonds being dunped on the market result in massively lower prices for these bonds, and a much higher interest rate CA must finance their debt at.

We are clearly at a decisive moment and there is no turning back for CA once this page turns.

[edit on 6-7-2009 by leo123]

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