Despite New York State's well-documented list of fiscal woes and budget ineptitude, its $3.9 billion note offering today is expected to get off the ground without a hitch, according to market participants.

The market is bracing for the state's annual tax and revenue anticipation notes with Merrill Lynch & Co. serving as bookrunner on the negotiated offering. Preliminary price talk, market sources said, was for the issue to come as 5.40s to yield 4.95% to 5.03%.

Concern about the ratings on the state's notes was allayed yesterday afternood when Moody's Investors Service and Standard & Poor's Corp. affirmed their current ratings. Moody's said it rated this issue MIG-2 and Standard & Poor's rated the issue SP-1. Standard & Poor's, however, put the state's securities on negative outlook.

Several traders noted that they expected the sale to go well, as the market's technical position is in good shape. The market sees a June 28 maturity date for California notes, sold last summer, and coupon reinvestment on July 1.

Although a fiscal 1992 budget, due April 1, was just passed two weeks ago, the dust has not yet settled. Gov. Mario M. Cuomo vetoed almost $1 billion in spending that state legislators put into the budget.

But lawmakers, fearing threats that overriding the vetoes would roil the market for the notes, decided to tip toe around their chambers until the sale was completed.

Noting that lawmakers were wary of Wall Street's potentially adverse reaction to rancor in the state's capital, one municipal bond underwriter said: "The lack of jaw boning is good."

He noted "everybody realizes there are problems. But if lawmakers start jousting each other, it implies a future lack of participation in solving the budget problems.

"The market is not going to frown on problems, but it will frown on the inability to solve the problems," he said. "If everyone is a being quiet, it implies that they will be able to deal with the problems."

The expected interest costs on the note deal are not out of line with its fiscal circumstances and what the market is demanding, one municipal market participant said. He noted high-quality tax-exempt notes were yielding about 4.40% in the secondary market yesterday.

For example, last week Los Angeles County sold $1.3 billion of Trans, paying 4.55% on notes maturing on July 1992 and carry a 5% coupon. The notes were rated MIG-1 and SP1-plus.

Responding to the rating news, Gov. Cuomo said yesterday, "I am pleased that the financial community has sustained New York State's ratings for our short-term notes and long-term bonds."

But only Standard & Poor's rated the states notes and bonds. Moody's just affirmed its ratings on the state's notes and its A rating on the $450 million bonds expected to be sold by th Local Government Assistance Corp this week. Moody's currently rates the state's general obligation bonds A.

"This budget debate is not over yet and we are recognizing that fact in our statement that Moody's will again review the ratings when legislative and executive actions concerning the fiscal 1992 budget reach a conclusion," said George W. Leung, managing director of state ratings with Moody's. The state's last MIG-1 rating was on a $460 million state Trans issue in June of 1989. Since then Moody's has rated the state's Trans MIG-2.

In a statement released with their rating review, Standard & Poor's noted that the state's financial plan "is subject to risks, including legislative override, a renegotiated spending level without adequate revenues to support it, and further weakness in the economy beyond than projected."

Standard & Poor's affirmed with A-rating on the state's GO bonds and commercial paper program. The state's $950 million of deficit notes sold in late February were also affirmed at SP-1.

State Comptroller Edward V. Regan, who said the state's budget was balanced after the governor's vetoes last week, said yesterday: "Any post-Spring borrowing negotiations on restoration of spending must produce a budget that is balanced.

"Otherwise the very strong implication and quite likely outcome, judging from comments today by the two rating agencies, will be an instantaneous drop in our credit rating to what undoubtedly will be the lowest of the fifty states." Louisiana and Massachusetts are now the states with the lowest GO ratings.

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