Fitch Downgrades S-T Rating for California GO CP Notes Ser A-3 & B-3 to 'F1'

NEW YORK--()--Fitch Ratings has downgraded the short-term rating to 'F1' from 'F1+' assigned to the State of California tax-exempt commercial paper notes series A-3 and taxable commercial paper notes series B-3 (notes). A maximum of $200,000,000 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 severally obligated irrevocable direct-pay letter of credit (LOC) provided by JPMorgan Chase Bank (rated, 'AA-/F1+', Stable Outlook) and CalPERS (rated 'AAA/F1+', Stable Outlook) supporting the notes, with a LOC to be provided by MUFG Union Bank, N.A. (MUFG; rated 'A/F1', Stable Outlook) and (ii) the reoffering of the notes.

KEY RATING DRIVERS

The 'F1' rating on the series A-3 and B-3 notes was downgraded based on the support by a LOC provided by MUFG which has a stated expiration date of Nov. 30, 2020, 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 acting as Issuing and Paying Agent (IPA) will continue as the IPA for the notes, and as IPA, is directed to request a drawing on the substitute LOC to pay principal and interest on maturing notes to the extent proceeds from the notes or other general obligation indebtedness issued by the state or other available funds are insufficient to make such payment in full. The substitute LOC provides sufficient coverage for the principal amount of notes and 90 days of interest calculated at 11% 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 LOC, MUFG may direct the IPA to immediately stop the issuance of any additional notes. In such event, 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 or other available funds.

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'.

Applicable Criteria

Rating Criteria for Letter of Credit-Supported Bonds and Commercial Paper (pub. 05 Apr 2016)
https://www.fitchratings.com/site/re/878782

U.S. Municipal Structured Finance Criteria (pub. 23 Feb 2015)
https://www.fitchratings.com/site/re/862222

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1015661

Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1015661

Endorsement Policy
https://www.fitchratings.com/regulatory

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Contacts

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

Contacts

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