Fitch Rates Riverside (CA) Variable Rate Rfdg Electric Rev Bds 2008A-C 'AAA/F1+'

NEW YORK--(BUSINESS WIRE)--Fitch has assigned a 'AAA/F1+' rating to the City of Riverside, California Variable Rate refunding electric revenue bonds consisting of: $84,515,000 Issue 2008A, $57,275,000 Issue 2008B, and $57,375,000 Issue 2008C (the 'bonds'). The rating is based on the rating of a direct-pay letter of credit ('LOC') supporting the bonds and the application of Fitch's joint probability methodology. The long-term 'AAA' rating assigned to the bonds is based jointly on the underlying rating assigned to the City of Riverside electric system (currently rated 'AA-' by Fitch), and the support provided by an LOC issued by Bank of America, N.A. (the 'bank,' currently rated 'AA/F1+' by Fitch) securing the bonds. The short-term 'F1+' rating is based solely on the LOC. The long-term 'AA' rating of Bank of America is on Negative Watch as of March 7, 2008. For more information on the underlying credit, please refer to the press release published on April 25, 2008, titled 'Fitch Rates Riverside, California 2008A-D Electric Revs 'AA-'; Outlook Stable'.

The long-term 'AAA' rating is based on Fitch's methodology which considers the joint probability of the failure of both a rated obligor and a bank LOC provider. The methodology results in a rating that is up to two notches higher than the stronger of the two credits if the following conditions are met: (1) both entities have a rating of 'A' or higher; (2) the transaction is structured such that payments from both the municipal issuer and the bank are in the flow of funds and both entities would have to fail to perform before the bonds defaulted; and (3) the credit of the bank and the rated obligor have no more than a medium degree of correlation; in this instance there is a low degree of correlation. Fitch has determined a low degree of correlation which results in a rating of 'AAA'. If either the City or the Bank were downgraded to 'A-' or lower, the joint probability could no longer be applied and the long-term rating would then reflect the high the higher of the two ratings.

The bank is obligated to make payments of principal of and interest on the Bonds upon maturity and redemption, as well as the purchase price for tendered bonds. The LOC provides full coverage of principal plus an amount equal to 37 days' interest at a maximum rate of 12% based on a year of 365 days and purchase price for tendered Bonds. The ratings will expire upon the earliest of: (a) Apr. 29, 2011, the initial stated expiration dates of the LOC, unless such date is extended; (b) following a conversion of the Bonds to a auction or long term rate mode; (c) upon any prior termination of the LOC; or (d) upon defeasance of the Bonds. The underwriter for the Bonds is Banc of America Securities, LLC. The sale of the Bonds is expected to be on or about May 1, 2008.

The Bonds initially bear interest at a weekly rate mode, but may be converted to a daily, auction or long term interest mode. While the bonds bear interest in the weekly rate mode, interest payments will be made on the first business day of each month, commencing June 2, 2008. Holders may tender their bonds on any business day, provided the trustee is given at least seven calendar days' prior notice of the purchase.

The Bonds are subject to mandatory tender: (1) on a conversion date; (2) on the substitution sate; (3) on the business day prior to termination date sated in a notice from the Bank stating that an event of default under the Reimbursement Agreement has occurred. Optional and mandatory redemptions provisions also apply to the bonds.

Bond proceeds will be to (i) refund all outstanding 2004B bonds, (ii) refund all outstanding 2005A Bonds, (iii) refund all outstanding 2005B Bonds and (iv) to fund a reserve account for the variable rate 2008 bonds.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.