Fitch Rates Fort Myers (Florida) Utility System Refunding Rev Bonds Series 2009 'AA-/F1+'

NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns a rating of 'AA-/F1+' to the $53,895,000 City of Fort Myers, Florida variable-rate utility system refunding revenue bonds series 2009 (the bonds). The long-term rating assigned to the bonds is based jointly on the underlying rating assigned to Fort Myers Utility System (currently rated 'A' with a Stable Outlook by Fitch), and the support provided by the irrevocable direct-pay letter of credit (LOC), provided Bank of America, N.A. (currently rated 'A+/F1+' with a Stable Outlook). (For information about the basis for the long-term component of the rating, see the criteria report entitled 'Dual-Party Pay Criteria for Long-Term Ratings on LOC-Supported U.S. Public Finance Bonds' dated June 11, 2009 available on Fitch's web site at 'www.fitchratings.com'.) The short-term 'F1+' rating will be based solely on the LOC.

The long-term rating is based on Fitch's dual-party pay methodology, which considers the likelihood of the failure of both a rated obligor and a bank LOC provider. The methodology results in a rating that is up to two notches higher than the stronger of the two credits if the following conditions are met: (1) both entities have a rating of 'A' or higher; (2) the transaction is structured such that payments from both the rated obligor and the bank are in the flow of funds and both entities would have to fail to perform before the bonds defaulted; and (3) the credit of the bank and the rated obligor have no more than a medium degree of correlation. In this instance, Fitch has determined a medium degree of correlation, which results in the rating of 'AA-' on bonds. If either the rating assigned to Fort Myers utility system revenue bonds or the bank is downgraded to 'A-' or lower, the methodology would no longer be applied and the long-term rating assigned to the bonds would then reflect the higher of the two ratings.

The LOC will provide full and sufficient coverage of principal plus an amount equal to 35 days' interest at a maximum rate of 12% based on a year of 365 days and purchase price for tendered bonds, while in the weekly and daily rate modes. The rating will expire upon the earliest of: (i) Nov. 2, 2010, the initial stated expiration date of the LOC, unless such date is extended; (ii) any prior termination of the LOC; or (iii) defeasance of the bonds. The remarketing agent for the bonds is Merrill Lynch, Pierce, Fenner & Smith Incorporated. The bonds are expected to be delivered on or about Nov. 3, 2009.

The bonds will initially bear interest at the weekly rate, but may be converted to a daily, commercial paper, term, fixed-rate mode. While bonds bear interest at the daily or weekly rate, interest is payable on the first business day of each month. During the daily and weekly rate modes, holders have the option to tender their bonds on any business day, following the required prior notice to the trustee. The bonds are subject to mandatory tender: (1) at the end of commercial rate periods; (2) on the mode change date; (3) at the end of the interest period for the term rate mode; (4) on the second business day preceding the expiration or termination of the LOC if the trustee has not received evidence of the extension of the LOC or the delivery of an alternate LOC; and (5) the substitution date of an alternate LOC. Optional and mandatory redemption provisions also apply to the bonds pursuant to the terms of the authorizing documents.

Proceeds of the bonds will be used by the City of Fort Myers to refund the city's outstanding utility system revenue refunding bonds, series 1999A.

Additional information is available at 'www.fitchratings.com'.

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