NEW YORK--(BUSINESS WIRE)--On the effective date of Sept. 25, 2014, Fitch Ratings will confirm the short-term 'F1' rating assigned to the $400,000,000 City of Austin, Texas combined utility systems commercial paper notes series A (the CP notes).
The rating action is in connection with (i) the substitution of the current irrevocable direct-pay letter of credit (LOC) severally provided by JPMorgan Chase Bank, N.A. (rated 'A+/F1', Stable Outlook) and State Street Bank & Trust Company (rated 'AA-/F1+', Stable Outlook) which currently supports the CP notes, with a substitute LOC to be provided by The Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU, rated 'A/F1', Stable Outlook) and (ii) the reoffering of the notes on Sept. 25, 2014.
KEY RATING DRIVERS:
On the effective date, the rating on the series A notes will be confirmed at 'F1' based on the support provided by the substitute BTMU LOC. The substitute BTMU LOC provides coverage for the principal amount of the notes and interest on the maturity date of the notes.
The short-term rating on the notes will expire on the earlier of Oct. 13, 2017, the expiration date of the substitute BTMU LOC, unless such date is extended, or upon any prior termination of the substitute BTMU LOC.
U.S. Bank, National Association will continue as the Issuing and Paying Agent (IPA) for the notes, and as IPA, is directed to request an advance under the substitute BTMU LOC to pay principal of and interest on maturing notes. The substitute BTMU LOC provides sufficient coverage for the principal amount of notes and 270 days of interest calculated at 12% based on a 365 day year.
The series A notes will be issued at par with interest due at maturity. Following the occurrence of an event of default under the LOC, the bank may direct the IPA to immediately stop the issuance of any additional notes and direct it to draw in full under the LOC for all notes outstanding. In such event, the substitute BTMU LOC will expire 10 days following receipt of the notice. The dealer for the notes is Goldman, Sachs & Co.
RATING SENSITIVITIES:
The rating is exclusively tied to the short-term rating that Fitch maintains on the substitute bank providing the LOC 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 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:
U.S. Municipal Structured Finance Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=736618
Rating Guidelines for Variable-Rate Demand Obligations and Commercial Paper Issued with External Liquidity Support
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=730736
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