Alaska governor halts sale of pension obligation bonds

October 25, 2016 9:12 PM EDT

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By Rory Carroll

(Reuters) - Alaska Governor Bill Walker has called off the planned sale of up to $3.3 billion in state pension obligation bonds due to a lack of support from members of the state senate, he said on Tuesday.

Low oil prices have contributed to a multibillion budget deficit for the current fiscal year and the sale of the bonds was seen by Walker's administration as a way to help shore up the state's Public Employee and Teachers' Retirement System.

"While we believe the financial benefits of issuing state pension obligation bonds significantly outweigh the financial risks, we recognize the need for legislative input," Walker said in a statement.

Walker met with Senate Finance Committee members this week where they warned against proceeding with the sale out of concern about taking on more debt.

"Given their lack of support, I have decided not to proceed with the issuance at this time," he said.

Credit ratings agency S&P Global Ratings had warned that Alaska could face a credit downgrade if it proceeded with the bond transaction.

"Not selling them now may delay the downward pressure on the rating, but absent fiscal reforms, many of the same fiscal pressures remain," S&P's Gabriel Petek told Reuters on Tuesday.

(Reporting by Rory Carroll in San Francisco; Editing by Lisa Shumaker)

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