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Lots of buyers for California IOUs, but not many sellers

July 20, 2009 |  3:51 pm

Buyers have been lining up to take California's IOUs off the hands of individuals, companies and other recipients.

But so far, the IOU holders aren’t very interested in selling -- probably because of expectations of a budget deal out of Sacramento soon. in New York, which created an electronic marketplace for the state’s IOUs last Wednesday, said it hadn’t yet recorded a single trade.

"We have significant buy-side interest, but sellers seem to be waiting to see what happens with the California Legislature," said Mark Murphy, a spokesman for SecondMarket.

IOU It isn’t certain that a budget deal would allow state Controller John Chiang to stop issuing IOUs in place of normal checks. That would depend on whether any agreement allows for Chiang to quickly accumulate the cash needed to make required payments.

Likewise, the terms of a deal would dictate whether Chiang could begin redeeming outstanding IOUs ahead of their official Oct. 2 redemption date, a spokesman for his office said.

The IOUs will earn an annualized tax-free interest rate of 3.75% until the state pays them off. That’s what has been attracting potential buyers to the scrip.

There have been dozens of offers from interested buyers on, some offering as little as 80 cents on the dollar. Hopefully, no recipient of this paper has been that desperate for cash.

-- Tom Petruno

Photo credit: Rich Pedroncelli / Associated Press