The state will use the cash to supplement its budget. According to The Golden 1 President/CEO Terry Halleck, California is working with other entities to issue another $1.5 billion in RANs.
"By using a private-placement approach, the state was able to avoid the significant broker fees that would otherwise accompany a public offering," she said.
Halleck scored a good deal, too. The note pays a 2.2% fixed rate, much higher than other investment options available to credit unions. It matures June 23, 2009.
In the unlikely event the state is unable to repay the note at maturity, Halleck said, The Golden 1 is prepared to accept a registered warrant from the state for subsequent repayment.
"Management considered this possibility when the purchase of the RAN was evaluated, and Golden 1 is well positioned to absorb this extension risk if such ultimately comes to pass," she said. "However, we are confident that the state will make every effort to repay the RAN in a timely manner and we are very pleased to be able to help the State of California."