New disclosures delay California bond sale

California delayed by one day its sale of $10 billion in short-term notes to update disclosures to buyers of the debt.

Treasurer Bill Lockyer said he was forced to amend the offering's disclosure documents because of a lawsuit filed Tuesday challenging the state's plans to sell and lease back 11 office properties. Failure to complete the real estate transaction would widen the state's projected budget gap, a possibility that investors might want to know about.

The change in disclosure means that individual investors who placed orders Monday and Tuesday for $5.89 billion of the notes must reconfirm they want them.

Lockyer had been planning to take institutional orders for the so-called revenue anticipation notes, or RANs, on Wednesday and complete the sale the same day. Those orders now will be taken on Thursday instead, his office said.

The state is expecting to pay an annualized tax-free yield of 1.25% on the series of notes maturing May 25, 2011, and 1.5% on the series maturing June 28. The final yields will be set after institutional investors have put in their orders.

After the lawsuit was filed, the three major credit-rating firms — Standard & Poor's, Moody's Investors Service and Fitch Ratings — reiterated their original ratings on the notes.

The legal hang-up over the sale of the buildings also will delay by one day the state's planned sale of $2 billion in Build America Bonds to finance voter-approved infrastructure projects. That deal was supposed to be priced Thursday, but now will be pushed to Friday, Lockyer said.

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