Bonds News

Moody's says may downgrade California's GO debt

NEW YORK, June 19 (Reuters) - Moody’s Investor Service on Friday placed California’s general obligation debt on alert for a possible downgrade, citing the state’s strained public finances.

The rating agency rates California at A2, or its sixth-highest investment grade.

The action reflects an expected budget gap for fiscal 2010 of more than $20 billion, or more than 20 percent of the general fund budget; the announcements by the state controller that without solutions California will not be able to meet all its financial obligations in July; a continued political stalemate, and the limited options available to the state, Moody’s said.

A lack of action could result in a multi-notch downgrade, said Moody’s. (Reporting by Ciara Linnane; Editing by Leslie Adler)