Fitch to Upgrade S-T Rating to 'F1+' on Sacramento Municipal Utility District (CA) CP Notes Ser K

NEW YORK--()--On the effective date of Dec. 18, 2014, Fitch Ratings will upgrade the short-term rating to 'F1+' from 'F1' assigned to the $100,000,000 Sacramento Municipal Utility District (SMUD) CA commercial paper (CP) notes, series K consisting of series K-1 and K-2 (notes). A maximum of $100,000,000 aggregate principal amount of authorized notes may be outstanding at any given time.

The rating action is in connection with the substitution of the current irrevocable direct-pay letter of credit (LOC) provided by JPMorgan Chase Bank, N.A. (rated 'A+/F1', Stable Outlook) supporting the notes, with a LOC to be provided by State Street Bank and Trust Company (State Street; rated 'AA-/F1+', Stable Outlook).

KEY RATING DRIVERS:

On the effective date, the rating assigned to the series K notes will be upgraded to 'F1+' from 'F1' based on the support provided by a substitute LOC to be provided by State Street. The State Street substitute LOC provides coverage for the principal amount of the notes and interest on the maturity dates of the notes.

The short-term rating on the notes will expire on the earlier of Dec. 18, 2018, the expiration date of the substitute State Street LOC, unless such date is extended, or upon any prior termination of the substitute State Street LOC.

U.S. Bank National Association acting as Depositary will continue as the Depositary for the notes, and as Depositary, is directed to request an advance under the substitute State Street LOC to pay principal and interest on maturing notes. The substitute State Street LOC provides sufficient coverage for the principal amount of notes and an amount equal to 90 days of interest calculated at 10% interest rate 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 Letter of Credit and Reimbursement Agreement, State Street may direct the Depositary to immediately stop the issuance of any additional notes. State Street will also notify the Depositary that the stated amount of the LOC shall be permanently reduced to the principal amount of notes then outstanding and interest thereon, and shall be further permanently reduced following the maturity of any such notes. State Street may also issue a final drawing notice directing the Depositary to draw on the LOC for principal and interest on all notes then outstanding, the proceeds of such drawing to be held by the Depositary to be paid as notes mature. J. P. Morgan Securities, LLC. continues as the dealer for the series K notes.

RATING SENSITIVITIES:

The short-term 'F1+' 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 and Related Research:

--'U.S. Municipal Structured Finance Criteria', Feb. 24, 2014;

--'Rating Guidelines for Variable-Rate Demand Obligations and Commercial Paper Issued with External Liquidity Support', June 2, 2014.

Applicable Criteria and Related Research:

U.S. Municipal Structured Finance Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=736618

Rating Guidelines for Variable-Rate Demand Obligations and Commercial Paper Issued with External Liquidity Support

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=730736

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Contacts

Fitch Ratings
Primary Analyst
Linda Friedman
Senior Director
+1-212-908-0727
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
New York
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Linda Friedman
Senior Director
+1-212-908-0727
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
New York
elizabeth.fogerty@fitchratings.com