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State calls in IOUs after getting $1.5-billion bank loan

August 27, 2009 | 10:58 am

California will begin redeeming its IOUs as scheduled beginning Sept. 4, after the state today closed on a $1.5-billion short-term loan from JPMorgan Chase, Treasurer Bill Lockyer said.

The state had previously announced the redemption date, subject to the bank loan.

California will pay JPMorgan Chase an annualized interest rate of 3% on the money. The loan is expected to be repaid by the end of September, after Lockyer sells up to $10.5 billion of so-called revenue anticipation notes to investors.

The state began issuing IOUs, formally known as registered warrants, to vendors and other creditors in early July after running short on cash. Through Tuesday, 414,000 IOUs worth $2.26 billion were outstanding, according to state Controller John Chiang.

Holders of the IOUs will earn a 3.75% annualized tax-free interest rate on the paper until the redemption date.

From Lockyer:

Holders of IOUs can redeem them via mail, or in person at the Treasurer’s office in Sacramento. The mailing address is: State Treasurer’s Office, Attn: Registered Warrant Desk, 915 Capitol Mall, Sacramento, CA 95814.

The Treasurer will redeem IOUs in person at the same address. The walk-in office hours will be Monday through Friday from 8 a.m. to 4 p.m., starting Sept. 4.

IOU holders who want to redeem via mail can send their IOUs to the Treasurer before Sept. 4. That will help the office process the IOUs more quickly come Sept. 4. More details about how to redeem IOUs are available at www.treasurer.ca.gov

-- Tom Petruno

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