The $7 billion The Golden 1 Credit Union yesterday purchased a $500 million private placement, short-term revenue anticipation note from the State of California, which the state issued to make up for budget shortfalls.
"By using a private-placement approach, the state was able to avoid the significant broker fees that would otherwise accompany a public offering," said Terry Halleck, president & CEO of the Sacramento-based credit union. The note pays a 2.2% fixed rate. 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 during this time of crisis."
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