S&P; Lifts Advisory on State’s Rating

California’s success in attaining a $4.3-billion interim loan to cover power costs prompted credit-rating company Standard & Poor’s to lift an advisory that it might cut the state’s rating further.

“We’ve been waiting for the state to at least temporarily take itself out of the position of using the general fund to buy power,” said Steven Zimmermann, a managing director in the San Francisco office of S&P.;

State leaders said the loan gave the Department of Water Resources breathing room until it can sell up to $13.4 billion of bonds in September for power costs. The water unit began buying electricity on behalf of the state’s two largest utilities in January.

S&P; rates California’s $25 billion in general obligation bonds A-plus. The rating ranks California among the least-credit-worthy of the 50 states. S&P;’s highest bond rating is AAA.

J.P. Morgan Chase & Co. provided $2.5 billion of the loan that closed Tuesday. Lehman Bros. lent $1 billion, followed by Commerzbank at $500 million and Bayerische Landesbank Girozentrale, $300 million.

California isn’t out of the woods, Zimmermann said, which is why S&P; still has a “negative” outlook on the state.