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TMCNet:  Fitch Rts State Pub Works Bd Lease Rev Bnds (Univ of CA) 'AAApre'; on Negative Watch

[February 18, 2014]

Fitch Rts State Pub Works Bd Lease Rev Bnds (Univ of CA) 'AAApre'; on Negative Watch

NEW YORK --(Business Wire)--

Fitch Ratings has assigned a rating of 'AAApre', Rating Watch Negative to the following bonds:

---$11,065,000 State Public Works Board (SPWB) of the State of California (SPWB) lease revenue bonds (The Regents of the University of California) 1993 series B (Various University of California Projects), maturing on June 1, 2020;

--$166,125,000 SPWB lease revenue refunding bonds (The Regents of the University of California) 2007 series A (Various University of California Projects), maturing June 1, 2015 - June 1, 2023;

--$78,310,000 SPWB lease revenue refunding bonds (The Regents of the University of California) 2007 series C (Various University of California Projects), maturing Sept. 1, 2014 - Sept. 1, 2022;

--$65,230,000 SPWB lease revenue bonds (The Regents of the University of California) 2010 series C (Various University of California Projects) subseries C-1 (tax-exempt bonds), maturing March 1, 2014 - March 1, 2035;

--$295,200,000 SPWB lease revenue bonds (The Regents of the University of California) 2011 series G (Various University of California Projects), maturing Dec. 1, 2015 - Dec. 1, 2031;

--$42,050,000 SPWB lease revenue bonds (The Regents of the University of California) 2012 series B (Business Unit II at the Irvine Campus), maturing June 1, 2015 - June 1, 2037;

--$84,015,000 SPWB lease revenue refunding bonds (The Regents of the University of California) 2012 series F (UCLA Replacement Hospitals), maturing Oct. 1, 2014 - Oct. 1, 2022;

--$77,370,000 SPWB lease revenue bonds (The Regents of the University of California) 2013 series C (Davidson Library at Santa Barbara), maturing March 1, 2017 - March 1, 2038.

KEY RATING DRIVERS:

The rating of 'AAApre', Rating Watch Negative is based on the pledge of securities in the escrow deposit funds securing each respective series of bonds and reflects the lien of the refunded bondholders on the escrow trust funds and that all amounts have been invested in: (1) direct non-callable obligations of the United States; and (2) non-callable senior obligations of Fannie Mae (FNMA) and Freddie Mac (FHLMC) (with the exception of the 2007 series A bonds, where amounts have been solely invested in direct non-callable obligations of the U.S.). The U.S. full faith and credit is currently rated 'AAA', on Rating Watch Negative by Fitch. As the ratings of FNMA and FHLMC are currently linked to the U.S. sovereign rating, any rating action on the U.S. sovereign rating will directly affect the rating on the bonds with escrow trust funds invested in those securities. Should Fitch's view of the strength of government support for FNMA/FHLMC be reduced or downgraded, the rating of FNMA/FHLMC may be delinked from the U.S. sovereign rating and may result in negative pressure on the rating of the bond series supported by those securities.

The bonds were refunded on Oct. 2, 2013 with portions of the proceeds of the $2,458,550,000 The Regents of the University of California general revenue bonds 2013 series AI, series AJ (taxable), series AK and series AL (variable rate demand bonds), as well as amounts released from various accounts associated with the refunded bonds. The ratings apply to the bonds listed by CUSIP numbers, below.

Pursuant to eight separate irrevocable escrow agreements, the State Treasurer, as escrow agent, holds separate special irrevocable escrow accounts, established by the State Controller within the State's Treasury, in trust for the benefit of the refunded bondholders for each respective series. All cash and securities held in the accounts are pledged irrevocably to the payment when due of interest on the refunded bonds and the payment of principal upon redemption or at maturity. In the future, any substitute investments for the 2007 series A bonds are limited to direct non-callable obligations of the U.S. and any substitute investments for the remaining seven series of bonds are limited to direct non-callable obligations of the U.S. and obligations of FNMA or FHLMC not callable prior to maturity. The 1993 series B bonds will be paid at maturity on June 1, 2020; the 2007 series A bonds will be paid at maturity on June 1, 2015 - June 1, 2023; the 2007 series C bonds will be paid at maturity on Sept. 1, 2014 - Sept. 1, 2022; the 2010 series C Subseries C-1 bonds will be redeemed at par on March 1, 2020, with the exception of March 1, 2014 - March 1, 2020 maturities which will be paid at mturity; the 2011 series G bonds will be redeemed at par on Dec. 1, 2021, with the exception of the Dec. 1, 2015 - Dec. 1, 2021 maturities which will be paid at maturity; the 2012 series B bonds will be redeemed at par on June 1, 2022, with the exception of the June 1, 2015 - June 1, 2022 maturities which will be paid at maturity; the 2012 series F bonds will be paid at maturity on Oct. 1, 2014 - Oct. 1, 2022; and the 2013 series C bonds will be redeemed at par on March 1, 2023, with the exception of the March 1, 2017 - March 1, 2023 maturities which will be paid at maturity.

Causey Demgen & Moore P.C. verified the mathematical accuracy of computations relating to the adequacy of income from escrowed funds to pay debt service requirements of each respective series of refunded bonds. These computations were contained in schedules provided to them by Barclays Capital, the underwriter for the refunding bonds. According to the Causey Demgen & Moore verification report, the securities and cash deposited will produce amounts necessary for timely payment of the principal and interest on each respective series of refunded bonds. Prior to accepting substitute or additional investment securities, the escrow agent must receive a new report verifying the continued sufficiency of escrowed funds to meet all future payments of principal and interest on each series of refunded bonds.

RATING SENSITIVITIES:

The rating is currently exclusively tied to the U.S. sovereign creditworthiness and will reflect all changes to that rating. Should Fitch's view of the strength of government support for FNMA/FHLMC be reduced or downgraded, the rating of FNMA/FHLMC may be delinked from the U.S. sovereign rating and may result in negative pressure on the rating of the bond series supported by those securities.

The rating of 'AAApre' on Rating Watch Negative applies to the bonds with the following CUSIP numbers:

1993 series B

13068GUT1

2007 series A

130685BZ2

130685CA6

130685CB4

130685CC2

130685CD0

130685CE8

130685CF5

130685CG3

130685CH1

130685CJ7

2007 series C

130685CY4

130685CZ1

130685DA5

130685DB3

130685DC1

130685DD9

130685DE7

130685DF4

130685DG2

130685DH0

130685DJ6

130685DK3

130685DL1

130685DM9

130685DN7

130685DP2

130685DQ0

2010 series C subseries C-1

130685D31

130685D49

130685D56

130685D64

130685D72

130685D80

130685D98

130685G53

130685E22

130685E30

130685E48

130685G61

130685E55

130685E63

130685E71

130685E89

130685E97

2011 series G

130685U73

130685W71

130685U81

130685W89

130685U99

130685W97

130685V23

130685X21

130685X70

130685V31

130685X39

130685V49

130685X47

130685X88

130685Y38

130685V56

130685X54

130685V64

130685X62

130685V72

130685X96

130685V80

130685V98

130685W22

130685W30

130685W48

130685W55

130685Y20

130685W63

2012 series B

1306853D0

1306853E8

1306853F5

1306853G3

1306853H1

1306853J7

1306853K4

1306853L2

1306853M0

1306853N8

1306853P3

1306853Q1

1306853R9

1306853S7

1306853T5

1306853U2

1306853V0

1306853W8

1306853X6

2012 series F

1306856V7

1306857E4

1306856W5

1306856X3

1306856Y1

1306856Z8

1306857A2

1306857F1

1306857B0

1306857C8

1306857D6

2013 series C

13068LDR3

13068LEK7

13068LDS1

13068LEL5

13068LDT9

13068LEM3

13068LDU6

13068LDV4

13068LDW2

13068LEN1

13068LDX0

13068LDY8

13068LDZ5

13068LEA9

13068LEB7

13068LEC5

13068LED3

13068LEE1

13068LEF8

13068LEG6

13068LEP6

13068LEH4

13068LEQ4

13068LEJ0

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:

--'U.S. Municipal Structured Finance Criteria', February 27, 2013;

--'Guidelines for Rating Prerefunded U.S. Municipal Bonds', Dec. 2, 2013.

Applicable Criteria and Related Research:

Guidelines for Rating Prerefunded U.S. Municipal Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724818

U.S. Municipal Structured Finance Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=701570

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=820928

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.


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