Fitch Rates $1.395B CA Prerefunded GO Bonds 'AAApre'; Stable Outlook

NEW YORK--()--Fitch Ratings assigns a rating of 'AAApre' to the $1,395,040,000 State of California (State) various purpose general obligation bonds (the 'refunded bonds') as follows:

--Dated June 1, 2006 and maturing Sept. 1, 2033 and 2035;

--Dated Sept 1, 2006 and maturing Sept. 1, 2033 and Sept. 1, 2036;

--Dated Nov. 1, 2006 and maturing Oct. 1, 2036;

--Dated Feb. 1, 2007 and maturing Dec. 1, 2027 and Dec. 1, 2032- 2036 (partial refunding of all maturities);

--Dated June 1, 2007 and maturing June 1, 2025-2027, June 1, 2032 and June 1, 2037 (partial refunding of all maturities).

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 fund and that all amounts have been invested in State and Local Government Securities (SLGS), which are direct non-callable obligations of the United States. The U.S. full faith and credit is currently rated 'AAApre', Stable Outlook by Fitch.

Fitch also maintains an unenhanced rating of 'A+', Stable Outlook on the bonds based on the GO pledge of the state's full faith and credit (rated 'A+', Stable Outlook by Fitch). The bonds remain a general obligation of the state even though the source of repayment is expected to be the securities in the escrow deposit fund, further described below. For more information on the State of California GO rating, see press release 'Fitch Rates California $2.3B GOs 'A+'; Outlook Stable' dated Feb. 25, 2016 available at 'www.fitchratings.com'.

The bonds were refunded on March 17, 2016 with proceeds of the State's tax-exempt various purpose general obligation refunding bonds. The ratings apply to the refunded bonds listed by CUSIP numbers, below. The refunded bonds dated June 1, 2006 and Sept. 1, 2006 will be redeemed on Sept. 1, 2016; the refunded bonds dated Nov. 1, 2006 will be redeemed on Oct. 1, 2016; the refunded bonds dated Feb. 1, 2007 will be redeemed on Dec. 1, 2016; and the refunded bonds dated June 1, 2007 will be redeemed on June 1, 2017, all at par plus accrued interest.

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 redemption. In the future, any substitute or additional investments are limited to non-callable obligations of the United States.

Grant Thornton 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 Citigroup Global Markets, Inc., underwriter for the refunding bonds. According to the Grant Thornton verification report, the anticipated receipts from the securities and cash deposited will produce amounts necessary to provide for the timely payment of interest when due and principal upon redemption. Prior to accepting substitute investment securities or disbursing funds to the State, the escrow agent must receive a new report of independent certified public accountants 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 bonds with the following CUSIP numbers:

13063CYT1

13063CYU8

13062TPT5

13062TPU2

13063CYY0

13063CF54

13063CG79

13063CF62

13063CF70

13063CF88

13063CF96

13063CG95

13063CH29

13063CH37

13063CH45

13063CH52

13063CH60

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=1002228

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1002228

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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
Janet Rosen
Analytical Consultant
+1-312-368-3172
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Linda Friedman
Senior Director
+1-212-908-0727
or
Committee Chairperson
Mario Civico
Senior Director
+1-212-908-0796
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Janet Rosen
Analytical Consultant
+1-312-368-3172
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Linda Friedman
Senior Director
+1-212-908-0727
or
Committee Chairperson
Mario Civico
Senior Director
+1-212-908-0796
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com