NEW YORK--(BUSINESS WIRE)--On the effective date of June 9, 2014, Fitch Ratings will take the following rating actions on the short-term ratings assigned to the $388,500,000 Department of Water and Power of the City of Los Angeles (LADWP), CA, power system variable-rate demand revenue bonds (VRDBs), 2002 series A, consisting of:
--$50,000,000 subseries A-1;
--$50,000,000 subseries A-2;
--$50,000,000 subseries A-3;
--$38,500,000 subseries A-4;
--$50,000,000 subseries A-5;
--$50,000,000 subseries A-6;
--$50,000,000 subseries A-7;
--$50,000,000 subseries A-8.
On the effective date, Fitch will: (i) confirm the 'F1' ratings assigned to the subseries A-1, A-2, A-4, A-5 and A-8 bonds; and (ii) downgrade the short-term ratings to 'F1' from 'F1+' for subseries A-3, A-6 and A-7 bonds. The short-term rating actions are in connection with the substitution of the liquidity facilities provided in the form of standby bond purchase agreements (SBPAs) currently issued by JPMorgan Chase Bank, National Association (rated 'A+/F1', Stable Outlook) for the subseries A-1, A-2, A-4 and A-8 bonds, The Bank of Nova Scotia (rated 'AA-/F1+', Stable Outlook) for the subseries A-3 and A-6 bonds, Barclays Bank PLC (rated 'A/F1', Stable Outlook) for the subseries A-5 bonds, and U.S. Bank, National Association (rated 'AA-/F1+', Stable Outlook) for the subseries A-7 bonds with substitute SBPAs to be provided by Bank of America, N.A. (rated 'A/F1', Negative Outlook) for the subseries A-1, A-4, A-6 and A-8 bonds, and Citibank, N.A. (rated 'A/F1', Stable Outlook) for the subseries A-2, A-3, A-5 and A-7 bonds.
KEY RATING DRIVERS:
On the effective date of the substitutions, the short-term 'F1' rating on the subseries A-1, A-4, A-6 and A-8 bonds will be based on the liquidity support provided by a Bank of America, N.A. substitute SBPA and the short-term 'F1' rating for the subseries A-2, A-3, A-5 and A-7 bonds will be based on the support of the Citibank, N.A. substitute SBPA. The long-term 'AA-', Stable Outlook rating assigned to all the bonds continues to be based upon the rating assigned by Fitch to LADWP's power revenue bonds. For information on the long-term rating, see the Fitch Press Release 'Fitch Rates Los Angeles, CA's Power Rev Bonds 'AA-; Outlook Stable', dated May 15, 2014, available on Fitch's website at www.fitchratings.com.
The substitute SBPAs provide for the payment of the principal component of purchase price plus an amount equal to 34 days of interest calculated at a maximum rate of 12%, based on a year of 365 days for tendered bonds during the daily or weekly interest rate modes in the event that the proceeds of a remarketing of the bonds are insufficient to pay the purchase price following an optional or mandatory tender. Each of the substitute SBPAs will expire on June 8, 2017, the stated expiration date, unless such date is extended; conversion to a mode other than the daily or weekly rate mode; or upon the occurrence of certain other events of default which result in a mandatory tender or upon any prior termination of the SBPAs. The short-term ratings will expire on the expiration or prior termination of the related SBPA. The remarketing agents for the bonds are: Morgan Stanley for Subseries A-1; Loop Capital Markets for Subseries A-2, A-6, and A-8; Citigroup Global Markets, Inc. for Subseries A-3, A-4 and A-7; and RBC Capital Markets, LLC for Subseries A-5.
The short-term ratings reflect the short-term ratings that Fitch maintains on the banks providing liquidity support, and will be adjusted upward or downward in conjunction with the short-term ratings of the banks and, in some cases, the long-term rating of the bonds. The long-term rating is exclusively tied to the creditworthiness of the bond obligor and will reflect all changes to that rating.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--"U.S. Municipal Structured Finance Rating Criteria", Feb. 24, 2014;
--"Rating Guidelines for Variable-Rate Demand Obligations and Commercial Paper Issued with External Liquidity Support", Jan. 27, 2014
Applicable Criteria and Related Research:
Rating Guidelines for Variable-Rate Demand Obligations and Commercial Paper Issued with External Liquidity Support
U.S. Municipal Structured Finance Criteria