State’s Rating Still Seen ‘at Risk’

Credit-rating agency Standard & Poor’s Corp. reaffirmed its A+ rating of California’s general obligation debt Monday, but warned that the grade remains at risk of being cut again.

S&P; issued its statement ahead of the state’s expected sale today of $1 billion in general obligation bonds. The securities are unrelated to the record $12.5-billion electricity revenue bond offering the state will make this summer.

In April, S&P; cut California’s bond rating by two notches, from AA to A+, citing “the mounting and uncertain cost” of the state’s electric power crisis.

The rating reduction left California with one of the lowest credit grades among the 50 states. S&P;’s rating of AAA is the highest grade a state can get.

On Monday, S&P; said it maintained the A+ rating because of the state’s “still-positive” general fund balance, the “deep and diverse economy” and “the possibility that [the electricity-bond offering] will reimburse the general fund for power purchases already made” on behalf of the state’s beleaguered utilities.

However, the rating agency warned that “substantial uncertainty remains as to the final cost to the state of the power crisis.” S&P; said higher costs incurred directly by the state, and/or deeper problems for the California economy because of power woes, could result in another rating downgrade.