SAN FRANCISCO, June 7 (Reuters) - Moody’s Investors Service upgraded on Friday by one notch its rating on $5.2 billion of outstanding California Economic Recovery Bonds to Aa2 from Aa3, citing two years of strong growth in the revenue used to pay the debt.
Moody’s in a statement added that the improved rating also reflects the debt’s “strong legal structure and healthy coverage levels based on conservative revenue forecasts, as well as the expectation that the revenue growth will continue to be strong for the life of the bonds.”
Moody’s outlook on the debt, supported by pledged sales-tax revenue, is stable and said it expects the bonds to be fully redeemed by 2017. California voters in 2004 authorized the state to issue up $15 billion of the bonds. The state sold $10.9 billion of the debt in its 2004 fiscal year and $3.2 billion of the bonds in its 2008 fiscal year to raise cash and to help balance its budgets.