NEW YORK--(BUSINESS WIRE)--Fitch has downgraded the short-term rating to 'F1' from 'F1+' assigned to the City of Los Angeles Wastewater System commercial paper revenue notes $100,000,000 tax-exempt series A-1 and taxable series B-1. 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 irrevocable direct-pay letter of credit (LOC) provided by Bank of New York Mellon (rated 'AA-/F1+', Stable Outlook) supporting the notes with a LOC issued by Barclays Bank PLC (Barclays, rated 'A/F1', Stable Outlook.
KEY RATING DRIVERS:
The 'F1' rating on the series A-1 and B-1 notes is based on the support of the Barclays LOC which has a stated expiration date of Dec. 7, 2018 unless extended or earlier terminated. The Barclays substitute LOC provides coverage for the principal amount of the notes and interest due 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 an advance under the substitute LOC to pay principal and interest on maturing notes. The substitute LOC provides sufficient coverage for the principal amount of notes and 270 days of interest calculated at 12% based on a 360-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, Barclays Bank PLC may direct the IPA to immediately stop the issuance of any additional notes. In such an event the Barclays LOC will expire after all the series A-1 and series B-1 notes mature and have been paid from a drawing on the Barclays LOC. Barclays also has the option of directing the IPA to make a final drawing in an amount equal to the principal amount of the outstanding notes and interest to accrue to the maturity of the outstanding notes. Upon the receipt of the proceeds of a final drawing under the Barclays LOC, the IPA will hold such funds uninvested and pay notes as they mature. Barclays Capital Inc. and Citigroup Global Markets Inc. are the dealers for the notes.
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.
Rating Guidelines for Letter of Credit-Supported Bonds and Commercial Paper (pub. 21 May 2015)
U.S. Municipal Structured Finance Criteria (pub. 23 Feb 2015)
Dodd-Frank Rating Information Disclosure Form