Fitch Ratings downgraded California's general obligation bond rating Thursday due to concerns about the state's economy and ongoing budget problems, likely raising costs for taxpayers and dampening demand for $4 billion in bonds the state intends to sell next week.
The announcement came days before State Treasurer Bill Lockyer plans a bond sale starting next Wednesday to replenish the state's Pooled Money Investment Account and enable the state to begin paying out $500 million to projects that desperately need public funding to continue.
Lockyer spokesman Tom Dresslar on Thursday used strong language to criticize ratings agencies for their downgrades.
"The ratings agencies have no credibility," Dresslar said. "They colluded with AIG and other titans of finance, and now they're screwing California taxpayers for a problem they helped create. We're going to sell $4 billion in California bonds next week and get the best possible deal for taxpayers, regardless of what they think of our creditworthiness. We've never defaulted on our bonds and no investor has ever failed to get what was owed to them on general-obligation bonds."
Fitch downgraded California's general-obligation bond rating from A+ to A, which likely means the state will have to offer more attractive rates and could preclude some investors from purchasing the bonds, said Alex Anderson, portfolio manager of Los Angeles-based Envision Capital Management. Fitch had California on a negative ratings watch since early last year.
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