NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned a rating of 'AAApre', Negative Outlook to the State of California (State) General Obligation (GO) Bonds, refunded on March 27, 2013, consisting of: $503,305,000 May 2003 GO Bonds maturing Feb. 1, 2014 - Feb. 1, 2033 and $455,065,000 July 2003 GO Bonds maturing Feb. 1, 2014 - Feb. 1, 2033.
KEY RATING DRIVERS:
The 'AAApre' Negative Outlook rating is based on the pledge of securities in the escrow deposit fund securing the bonds and reflects the lien of the refunded bondholders on the escrow trust funds and that all amounts have been invested in direct non-callable obligations of the United States. The U.S. full faith and credit is currently rated 'AAA', Negative Outlook by Fitch.
Fitch also maintains an unenhanced rating of 'A-', Positive Outlook on the bonds based on the GO pledge of the state's full faith and credit (rated 'A-', Positive Outlook by Fitch). The bonds remain a general obligation of the state even though the source of repayment is expected to be the securities in the escrow deposit fund, further described below. For more information on the State of California GO rating, see press release 'Fitch Affirms California's GO Rating at 'A-'; Outlook Positive' dated April 2, 2013 available at 'www.fitchratings.com'.
The GO bonds were refunded with proceeds of the State's Various Purpose General Obligation Refunding Bonds issued in March 2013. The ratings apply to the bonds listed by CUSIP numbers, below.
Pursuant to an irrevocable escrow agreement, the escrow agent, the State Treasurer, holds a separate special irrevocable account, established by the State Controller within the State's escrow fund, in trust for the benefit of the refunded bondholders. All cash and securities held in this account are pledged irrevocably to the payment when due of interest on the refunded bonds and the payment of principal upon redemption. In the future, any substitute or additional investments may also include senior unsubordinated direct obligations of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation that are non-callable and non-prepayable. In addition, up to $5,000 may be held in the State's Surplus Money Investment Fund. Both the May 2003 and July 2003 bonds will be redeemed on Aug. 1, 2013.
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 the refunded bonds. These computations were contained in schedules provided to them by Public Resources Advisory Group, financial advisor 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 the refunded bonds. Prior to accepting substitute or additional investment securities or disbursing funds to the State, 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 the refunded bonds.
RATING SENSITIVITIES:
The rating is exclusively tied to the U.S. sovereign creditworthiness and will reflect all changes to that rating.
The 'AAApre' rating applies to the bonds with the following CUSIP numbers:
13063BTC6
13063BTB8
13063BTE2
13063BTD4
13063BTG7
13063BTF9
13063BTJ1
13063BTH5
13063BTK8
13063BTM4
13063BTL6
13063BTP7
13063BTN2
13063BU83
13063BU91
13063BV25
13063BV33
13063BV41
13063BV58
13063BV66
13063BV74
13063BX23
13063BW81
13063BX31
13063BX64
13063BX72
13063BX80
13063BX98
13063B2L5
13063BY22
13063B2M3
13063B2N1
13063B2P6
13063B2Q4
13063BY30
13063B2R2
13063BY48
13063B2S0
13063BY55
13063B2T8
13063BY63
13063BY71
13063BY89
13063BY97
13063BZ21
13063BZ39
13063BZ47
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'U.S. Municipal Structured Finance Criteria', Feb. 27, 2013;
--'Guidelines for Rating Prerefunded U.S. Municipal Bonds', Dec. 4, 2012.
Applicable Criteria and Related Research
U.S. Municipal Structured Finance Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=701570
Guidelines for Rating Prerefunded U.S. Municipal Bonds
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695465
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=789738
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