Fitch to Take Various Rating Actions on Bay Area Toll Auth (CA), Toll Bridge Rev Bds

NEW YORK--()--On the effective date of Oct. 16, 2014, Fitch Ratings will take the following ratings actions with respect to the $400,000,000 Bay Area Toll Authority San Francisco Bay Area toll bridge revenue bonds, variable rate demand bonds, series 2007 G1, A2, B2, C2, D2; series 2008C1, E1:

--Confirm the 'AA+/F1', Stable Outlook ratings on the series 2007A-2, 2007C-2, and 2008E-1;

--Downgrade the long-term rating to 'AA-' from 'AA+', Stable Outlook on the series 2007B-2 and 2008C-1, and confirm the short-term 'F1' rating;

--Confirm the 'AA+/F1' ratings on series 2007D-2. The Rating Outlook for the long-term rating will be Negative;

--Confirm the long-term 'AA+', Stable Outlook rating on series 2007G-1, and upgrade the short-term rating to 'F1+'.

The rating actions are in connection with the (i) Oct. 16, 2014, mandatory tender and reoffering of the bonds; and the (ii) substitution of the irrevocable direct-pay letters of credit (LOCs) securing the bonds with a: LOC to be provided by Bank of Tokyo-Mitsubishi, UFJ, Ltd. ('A/F1', Stable Outlook), for the existing LOC provided by MUFG Union Bank, NA ('A/F1', Stable Outlook) for series 2007A-2 and C-2, and the existing LOC provided by Bank of Tokyo-Mitsubishi, UFJ, Ltd. for series 2008E-1; LOC to be provided by Sumitomo Mitsui Banking Corporation ('A-/F1', Stable Outlook) for the existing LOC provided by JPMorgan Chase Bank, NA ('A+/F1', Stable Outlook) for series 2007B-2, and the existing LOC provided by MUFG Union Bank for series 2008C-1; LOC to be provided by Bank of America, NA ('A/F1', Negative Outlook), for the existing LOC provided by JPMorgan Chase Bank, NA ('A+/F1', Stable Outlook) for series 2007D-2; LOC to be provided by U.S. Bank, NA ('AA-/F1+', Stable Outlook) for the existing LOC provided by JPMorgan Chase Bank, NA for series 2007G-1.

KEY RATING DRIVERS:

The long-term ratings for series 2007B-2 and 2008C-1 will now be based on the higher of the underlying long-term rating assigned to the bonds by Fitch (currently rated 'AA-', Stable Outlook), and the long-term rating assigned by Fitch to the bank providing the substitute LOC securing those bonds. The short-term ratings will be based solely on the LOC.

The long-term ratings for all other series will continue to be determined using Fitch's dual-party pay criteria and will be based jointly on the underlying rating assigned to those bonds by Fitch (currently rated 'AA-', Stable Outlook), and the ratings assigned by Fitch to the respective LOC banks, which will provide the substitute LOCs as support for the bonds. The short-term ratings will be based solely on the substitute LOCs.

For information about the underlying credit rating see press release dated July 9, 2014 available at 'www.fitchratings.com'.

Fitch's dual-party pay criteria consider the likelihood of the failure of both a rated obligor and a bank LOC provider. The methodology will be applied to all but series 2007B-2 and 2008C-1. The methodology results in a long-term 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. Fitch has determined a low degree of correlation between the banks and the obligor which results in a rating of 'AA+' for the bonds. If either the underlying bond rating or the bank rating were downgraded to 'A-' or lower, the dual-party pay criteria could no longer be applied, and the long-term rating assigned to the bonds would then be adjusted to the higher of the bank rating and the underlying bond rating.

Pursuant to the substitute LOCs, the banks are obligated to make regularly scheduled payments of principal of and interest on the bonds in addition to payments due upon maturity and redemption, as well as purchase price for tendered bonds. The ratings will expire upon the earliest of: (a) Oct. 16, 2019, the initial stated expiration date of the substitute LOCs, unless such date is extended; (b) conversion to a mode other than daily or weekly rate; (c) any prior termination of the substitute LOCs; and (d) defeasance of the bonds. The substitute LOCs provide full and sufficient coverage of principal plus an amount equal to 34 days of interest at a maximum rate of 12% based on a year of 365 days and purchase price for tendered bonds, while in the daily or weekly rate mode. The remarketing agents are: Barclays Capital Inc., J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Stifel, Nicolaus & Company, Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Morgan Stanley & Co. LLC.

RATING SENSITIVITIES:

As described above, the long-term ratings are tied to the long-term rating assigned to the bond obligor and the long-term rating that Fitch maintains on the bank providing the substitute LOC. Changes to one or both of these ratings may affect the long-term rating assigned to the bonds.

The short-term ratings are exclusively tied to the short-term rating that Fitch maintains on the banks providing the substitute LOCs 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 Letter of Credit-Supported Bonds and Commercial Paper', June 2, 2014,

--'Dual-Party Pay Criteria for Long-Term Ratings on LOC-Supported U.S. Public Finance Bonds', March 8, 2013.

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 Letter of Credit-Supported Bonds and Commercial Paper

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749431

Dual-Party Pay Criteria for Long-Term Ratings on LOC-Supported U.S. Public Finance Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=701572

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst:
Joseph Staffa
Senior Director
+1-212-908-0829
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst:
Linda Friedman
Senior Director
+1-212-908-0727
or
Committee Chairperson:
Trudy Zibit
Managing Director
+1-212-908-0689
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526 (New York)
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst:
Joseph Staffa
Senior Director
+1-212-908-0829
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst:
Linda Friedman
Senior Director
+1-212-908-0727
or
Committee Chairperson:
Trudy Zibit
Managing Director
+1-212-908-0689
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526 (New York)
elizabeth.fogerty@fitchratings.com