May 4, 2011 / 8:15 PM / 9 years ago

UPDATE 1-Louisiana rating raised to AA by S&P

(Adds details, paragraphs 3-6)

NEW YORK, May 4 (Reuters) - Standard & Poor’s raised Louisiana’s credit rating one notch to AA on Wednesday, saying the state is making progress dealing with its budget problems.

“We expect the state to continue to address its structural challenges, such as its underfunded pension systems, and we anticipate that it will likely continue to make expenditure cuts as needed to ensure balanced operations,” S&P credit analyst Sarah Smaardyk in a statement.

The ratings upgrade could help lower Louisiana’s borrowing costs.

Smaardyk said in a telephone interview that Louisiana has $6.2 billion of outstanding debt that is repaid from taxes.

The upgrade comes about six years after deadly Hurricane Katrina swamped New Orleans, causing tens of billions of dollars of damage.

The federal funds that flowed in to help Louisiana recover provided a major economic boost, which was followed by sharp spikes in energy prices, an aid to the oil-producing state.

Moody’s Investors Service in February rated Louisiana Aa2, but cautioned that the full impacts of the BP PLC (BP.L) Deepwater Horizon oil spill are still being assessed.

Louisiana’s unemployment rate has recently been below the national average, Smaardyk said. In March, Louisiana’s unemployment rate was 8.1 percent, below the country’s 8.8 percent rate. (Reporting by Joan Gralla; Editing by Leslie Adler)

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