Fitch Downgrades Houston, TX Combined Utility System CP Notes Ser B-6 to 'F1'; Affs Ser B-4 at 'F1+'

NEW YORK--()--Fitch Ratings has downgraded the short-term rating assigned to the City of Houston, Texas combined utility system commercial paper notes, $100,000,000 series B-6 to 'F1' from 'F1+', and affirmed the 'F1+' rating assigned to $100,000,000 series B-4. The rating actions are in connection with the substitution of the current Revolving Credit Agreement (RCA) provided by U.S. Bank, NA ('AA/F1+'/Stable Outlook) with a RCA to be provided by Bank of America, NA ('A+/F1'/Stable Outlook) for series B-6, and the substitution of the current letter of credit (LOC) provided by State Street Bank and Trust Company ('AA/F1+'/Stable Outlook) with a RCA to be provided by State Street for series B-4.

KEY RATING DRIVERS

The rating on the series B-6 notes has been downgraded to 'F1' based on the liquidity support provided in the form of a RCA provided by Bank of America, which has a stated expiration date of July 12, 2019, unless extended or earlier terminated. The rating on the series B-4 notes is affirmed at 'F1+' based on the liquidity support provided in the form of a RCA provided by State Street Bank and Trust Company ('AA/F1+'/Stable Outlook), which has a stated expiration date of July 12, 2019, unless extended or earlier terminated. The substitute RCAs provide coverage for the principal amount of the notes plus 270 days of interest calculated at 10% based on a 365 day year. The rating assigned to the first lien obligations of the City of Houston Combined Utility System is 'AA'/Stable Outlook.

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 RCAs whenever proceeds of the sale of rollover notes are insufficient to pay maturing notes. The substitute RCAs provide sufficient coverage for the principal amount of notes and accrued interest on the notes.

All notes will be issued at par, with interest due at maturity. Following the occurrence of an event of default under a RCA, the bank may direct the IPA to immediately stop the issuance of any additional notes. In such event, the substitute RCA will expire after all the notes supported by such RCA mature and have been paid from funds drawn on the substitute RCA. In addition, the substitute RCA may be terminated by the bank upon the occurrence of specified immediate termination events. The dealers for the notes are Barclays Capital, Citigroup, Ramirez & Co., Inc., Rice Financial Products, and J.P. Morgan Securities, Inc.

RATING SENSITIVITIES

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

Additional information is available at www.fitchratings.com.

Applicable Criteria

Rating Criteria for Letter of Credit-Supported Bonds and Commercial Paper (pub. 05 Apr 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878782

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=1008891

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1008891

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, Inc.
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
Vincent Barberio
Managing Director
+1-212-908-0505
or
Media Relations
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings, Inc.
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
Vincent Barberio
Managing Director
+1-212-908-0505
or
Media Relations
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com