August 22, 2009

California removed from Moody’s watch list

Moody's Investor Services has removed the state of California from its list of debtors facing possible bond-rating downgrades, authorities said.

The outlook on the state of California is stable at this time, based on the expectation that the state will deal with any further challenges to its budgetary balance and liquidity without another major cash crisis, Moody's said Friday.

Moody's warned, however, that deep cuts in spending to eliminate a $23.6-billion deficit would most certainly leave the state with significant structural imbalance.

The state was removed from Moody's watch list the same day California announced $2.15 billion in IOUs issued by the state since July 2 can be redeemed beginning Sept. 4, almost a month earlier than originally scheduled, the Los Angeles Times reported Saturday.

Moody's action and early repayment of the IOUs reflects an improved cash-flow position and confidence in the state's future, said Tom Dresslar, a spokesman for the state treasurer's office.