Fitch to Downgrade S-T Rating on Brownsville Utilities Sys CP Notes Ser A to 'F1'

NEW YORK--()--On the effective date of Nov. 18 2016, Fitch Ratings will downgrade the short-term rating to 'F1' from 'F1+' assigned to the $100,000,000 City of Brownsville, Texas utilities system commercial paper (CP) notes series A. A maximum $100,000,000 aggregate principal amount of authorized notes may be outstanding at any given time.

The rating action is in connection with (i) the substitution of the current irrevocable direct-pay letter of credit (LOC) provided by Bank of Montreal ('AA-/F1+'/Stable Outlook) supporting the notes, with a LOC to be provided by MUFG Union Bank, N.A. (MUFG, 'A/F1'/Stable Outlook) and (ii) the reoffering of the notes.

KEY RATING DRIVERS

On the effective date, the rating on the series A notes will be downgraded to 'F1' from 'F1+' based on the LOC support to be provided by MUFG which has a stated expiration date of Nov. 15, 2019, unless extended or earlier terminated. The MUFG substitute LOC provides coverage for the principal amount of the notes and interest on the maturity dates of the notes.

U.S. Bank National Association will continue as Issuing and Paying Agent (IPA), and as IPA is directed to request an advance under the LOC to pay principal and interest on maturing notes. The substitute LOC provides sufficient coverage for the principal amount of notes 270 days of interest calculated at 15% based upon a 365 day year.

All notes will be issued at par, with interest due at maturity. Following the occurrence of an event of default under the Reimbursement Agreement between MUFG and the issuer, MUFG may direct the IPA to immediately stop the issuance of any additional notes and to draw under the LOC for principal and interest upon maturity of all outstanding notes or to draw in full on the LOC for all principal and interest to accrue on outstanding notes through their maturity date. If MUFG directs the IPA to stop issuing additional notes, the substitute LOC will expire after all the notes supported by such LOC mature and have been paid from funds drawn on the substitute LOC. If MUFG directs the IPA to draw in full for all CP outstanding, the LOC will expire 10 days after the IPA's receipt of such notice. The dealer for the notes is Citigroup Global Markets Inc.

RATING SENSITIVITIES

The rating is exclusively tied to the short-term rating that Fitch maintains on the substitute bank providing the LOC and will reflect all changes to that rating.

Additional information is available at www.fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Mario Civico
Senior Director
+1-212-908-0796
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Richard Park
Director
+1-212-908-0289
or
Committee Chairperson
Joseph Staffa
Senior Director
+1-212-908-0829
or
Media Relations
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Mario Civico
Senior Director
+1-212-908-0796
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Richard Park
Director
+1-212-908-0289
or
Committee Chairperson
Joseph Staffa
Senior Director
+1-212-908-0829
or
Media Relations
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com