NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned a rating of 'AAApre' to the $929,735,000 State of California Economic Recovery Bonds, series 2009A maturing on July 1, 2016-July 1, 2018, and July 1, 2022, all of which were refunded on Aug. 5, 2015. The Rating Outlook is Stable.
KEY RATING DRIVERS:
The 'AAApre', Stable Outlook rating is based on the pledge of securities in the irrevocable escrow fund securing the bonds and reflects the lien of the refunded bondholders on the escrow trust funds and that all amounts have been invested in direct non-callable obligations of the United States. The U.S. full faith and credit is currently rated 'AAApre', Stable Outlook by Fitch.
The bonds were refunded with funds contributed by the state. The ratings apply to the series 2009A bonds listed by CUSIP numbers, below.
Pursuant to an irrevocable escrow certificate, the State Treasurer, as escrow agent, holds a separate special irrevocable escrow fund, established by the State Controller within the State's Treasury, in trust for the benefit of the refunded bondholders. All cash and securities held in this fund are pledged irrevocably to the payment when due of interest on the refunded bonds and the payment of principal upon maturity or earlier redemption. In the future, any substitute or additional investments must be limited to non-callable obligations of the U.S. and non-callable, non-prepayable senior unsubordinated obligations of the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation or the Government National Mortgage Association. The refunded bonds maturing on July 1, 2016-July 1, 2018 are escrowed to maturity. The refunded bonds maturing on July 1, 2022 will be redeemed on July 1, 2016 at par plus accrued interest.
Causey Demgen & Moore P.C. verified the mathematical accuracy of computations relating to the adequacy of income from escrowed funds to pay debt service requirements of the refunded bonds. These computations were contained in schedules provided to them by Montague DeRose and Associates, LLC, financial advisor for the refunded bonds transaction. According to the Causey Demgen & Moore verification report, the securities and cash deposited will produce amounts necessary to provide for the timely payment of principal and interest when due at maturity or earlier redemption. Prior to accepting substitute investment securities or disbursing funds, the escrow agent must receive a new report verifying the continued sufficiency of escrowed funds to meet all future payments of principal and interest on the refunded bonds.
RATING SENSITIVITIES
The rating is exclusively tied to the U.S. sovereign creditworthiness and will reflect all changes to that rating.
The 'AAApre', Stable Outlook rating applies to the series 2009A bonds with the following CUSIP numbers:
13067JKP5
13067JKX8
13067JKQ3
13067JKY6
13067JMZ1
13067JKV2
Additional information is available at www.fitchratings.com.
Applicable Criteria
Guidelines for Rating Prerefunded U.S. Municipal Bonds (pub. 09 Dec 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=818549
U.S. Municipal Structured Finance Criteria (pub. 23 Feb 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=862222
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=989951
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=989951
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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