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California HSR will not serve San Francisco

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[quote user="blue streak 1"] To complicate this argument more today's (WED) Wall St Journal stated that California is having no trouble in raising $8.8 billion for a municiple deal.  The rate the WSJ quotes on short term May and June 2010 notes is a mind boggling 1.25 and 1.5 %. Final price to be set today. These are not long term bonds of course but may give some indication of what HSR bonds will do.  [/quote]Unless the municipal bonds are backed by the state, which would be unusual, its poor credit rating would not pass through to the issuer, i.e. <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" /><st1:City w:st="on">San Diego</st1:City>, <st1:place w:st="on"><st1:City w:st="on">Bakersfield</st1:City></st1:place>, Sacramento ISD, etc.  Each issuer’s bonds would be rated independently, depending on the type of debt, and would attract a rating based on the issuer’s management of its financial affairs.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o:p></o:p>The HSR may sell short term bonds to raise working capital, but eventually it would have to obtain long term financing.  The transaction costs of issuing short term bonds, to be followed shortly thereafter by long term bonds, which would incur additional transaction costs, would be counter productive.  <o:p></o:p>I understand that the bonds will be guaranteed by <st1:State w:st="on"><st1:place w:st="on">California</st1:place></st1:State>.  If this is true, then the seller is going to have to wear the state's credit rating, which is not good.  Moreover, given some of the controversies surrounding the project, anyone buying the bonds before they are resolved would want a premium to cover the uncertainty associated with the project's viability.  <o:p></o:p>
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