Fitch Rates Eastern Municipal Water District (CA) Revs, Series 2014B 'AA/F1+'

NEW YORK--()--Fitch Ratings assigns an 'AA/F1+' rating to the $45,175,000 Eastern Municipal Water District, California's refunding water and wastewater revenue bonds, series 2014B. The Rating Outlook is Stable for the long-term rating.

KEY RATING DRIVERS:

The long-term 'AA' rating is based on a subordinate lien on net system revenues with sound debt service coverage, very healthy liquidity, strong management, a solid service area and a high but manageable debt burden. For more information on the long-term rating, see the press release dated May 28, 2014 titled 'Fitch Affirms Eastern Municipal Water District, CA's Sr. Revs at 'AA+'; Outlook Stable' available on Fitch's website at www.fitchratings.com.

The short-term 'F1+' rating is based on the liquidity support provided by Wells Fargo Bank, N.A. (rated 'AA-/F1+', Stable Outlook) in the form of a Standby Bond Purchase Agreement (SBPA).

The SBPA provides for the payment of the principal component of purchase price plus an amount equal to 40 days of interest calculated at a maximum rate of 12%, based on a year of 365 days for tendered bonds during the daily and weekly 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. The SBPA also provides for the interest portion of the purchase price that accrues during the initial interest rate mode for the period from and including Oct. 8, 2014 to and including Oct. 14, 2014. The SBPA will expire on Oct. 6, 2017, the stated expiration date, unless such date is extended; upon conversion to a mode other than the daily or weekly rate; or upon the occurrence of certain other events of default which result in a mandatory tender or other termination events related to the credit of the bond obligor which result in an automatic and immediate termination. The short-term 'F1+' rating will expire on the expiration or prior termination of the SBPA. The bonds are expected to be delivered on or about Oct. 8, 2014. U.S. Bancorp Investments, Inc. and U.S. Bank Municipal Securities Group, a division of U.S. Bank National Association, will collectively serve as remarketing agent for the 2014B bonds commencing Oct. 15, 2014.

The bonds will be issued in an initial interest rate mode, which will be in effect from Oct. 8, 2014 - Oct.14, 2014, and the bonds will be automatically converted (without a mandatory tender) to the daily rate mode on Oct. 15, 2014. There are no mandatory or optional tenders or redemptions during the initial interest rate period. After the initial interest rate period ends, the bonds may be converted to the weekly, long-term, or bond interest term rate. While bonds bear interest in the daily rate mode, interest is paid on the fifth business day of each month, commencing Nov. 7, 2014. Interest accrued during the initial rate period will also be paid on Nov. 7, 2014. Holders of bonds bearing interest in the daily and weekly rate modes may tender their bonds for purchase with the requisite prior notice. The trustee/tender agent is obligated to make timely draws on the SBPA to pay purchase price in the event of insufficient remarketing proceeds, and in connection with the expiration or termination of the SBPA, except in the case of the credit-related events permitting immediate termination or suspension of the SBPA.

Funds drawn under the SBPA are held uninvested, and are free from any lien prior to that of the bondholders. The bonds are subject to mandatory tender: (1) upon conversion of the interest rate; (2) upon expiration, substitution or termination of the SBPA; and (3) following the receipt of written notice from the bank of an event of default under the SBPA, directing such mandatory tender. Optional and mandatory redemption provisions also apply to the bonds.

Bond proceeds will be used to provide funds to prepay all of the outstanding Eastern Municipal Water District Water and sewer revenue refunding variable rate certificates of participation series 2008D and to pay costs of issuance of the 2014B bonds.

RATING SENSITIVITIES:

The short-term rating reflects the short-term rating that Fitch maintains on the bank providing liquidity support and will be adjusted upward or downward in conjunction with the short-term rating of the bank and, in some cases, the long-term rating of the bond obligor. 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 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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=891135

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Contacts

Fitch Ratings, New York
Media Relations
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com
or
Primary Analyst
Analytical Consultant
Kasia Reed, +1-212-908-0500
or
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Managing Director
Trudy Zibit, +1-212-908-0689
or
Committee Chairperson
Senior Director
Linda Friedman, +1-212-908-0727

Contacts

Fitch Ratings, New York
Media Relations
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com
or
Primary Analyst
Analytical Consultant
Kasia Reed, +1-212-908-0500
or
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Managing Director
Trudy Zibit, +1-212-908-0689
or
Committee Chairperson
Senior Director
Linda Friedman, +1-212-908-0727