Fitch Rates $930MM California Prerefunded GO Bonds 'AAApre'; Outlook Stable

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assigns a rating of 'AAApre' to the $930,050,000 State of California (State) various purpose general obligation bonds (the refunded bonds) as follows:

--Dated Dec. 1, 2005 and maturing March 1, 2035;

--Dated June 1, 2006 and maturing Sept. 1, 2027, Sept. 1, 2028, Sept. 1, 2030, Sept. 1, 2031, Sept. 1, 2032, Sept. 1, 2033 (partial refunding) and Sept. 1, 2035 (partial refunding);

--Dated Sept. 1, 2006 and maturing Sept. 1, 2023, Sept. 1, 2031 and Sept. 1, 2032;

--Dated Nov. 1, 2006 and maturing Oct. 1, 2017 to Oct. 1, 2020, Oct. 1, 2023, Oct. 1, 2026, Oct. 1, 2028, Oct. 1, 2031 (partial refunding) and Oct. 1, 2036 (partial refunding);

--Dated Feb. 1, 2007 and maturing Dec. 1, 2017 to Dec. 1, 2022, Dec. 1, 2024 to Dec. 1, 2026, Dec. 1, 2029 and Dec. 1, 2032 (partial refunding).

The Rating Outlook is Stable.

KEY RATING DRIVERS

The 'AAApre', Stable Outlook rating is based on the pledge of securities in the irrevocable escrow 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 State and Local Government Securities (SLGS), which are direct non-callable obligations of the United States. The U.S. full faith and credit is currently rated 'AAA', Stable Outlook by Fitch.

Fitch also maintains an unenhanced rating of 'A+', Stable Outlook on the bonds based on the general obligation (GO) pledge of the State's full faith and credit (rated 'A+', Stable 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 Rates California $960MM GOs 'A+'; Outlook Stable' dated Oct. 5, 2015 available at 'www.fitchratings.com'.

The bonds were refunded on Nov. 3, 2015 with proceeds of the State's tax-exempt various purpose GO refunding bonds. The ratings apply to the refunded bonds listed by CUSIP numbers, below. The refunded bonds dated Dec. 1, 2005 will be redeemed on March 1, 2016; the refunded bonds dated June 1, 2006 and Sept. 1, 2006 will be redeemed on Sept. 1, 2016; the refunded bonds dated Nov. 1, 2006 will be redeemed on Oct. 1, 2016, and the refunded bonds dated Feb. 1, 2007 will be redeemed on Dec. 1, 2016, all at par plus accrued interest.

Pursuant to an irrevocable escrow certificate, the State Treasurer, as escrow agent, holds a separate special irrevocable escrow fund, established by the State Controller within the State's Treasury, in trust for the benefit of the refunded bondholders. All cash and securities held in this fund 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 are limited to non-callable obligations of the United States.

Grant Thornton 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 refunded bonds transaction. According to the Grant Thornton verification report, the anticipated receipts from the securities and cash deposited will produce amounts necessary to provide for the timely payment of principal and interest when due at maturity or earlier redemption. Prior to accepting substitute 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', Stable Outlook rating applies to the bonds with the following CUSIP numbers:

13063CTR1

13063CWB2

13063CWC0

13063CWD8

13062TEM2

13062TEN0

13063CYR5

13063CYS3

13062TPH1

13062TPR9

13062TPS7

13062TRS5

13062TRT3

13062TRU0

13062TRV8

13062TRX4

13062TRY2

13062TRZ9

13063CYV6

13063CYW4

13062TYK4

13062TYL2

13062TYM0

13062TYN8

13062TYP3

13062TYQ1

13062TYS7

13062TYT5

13062TYU2

13062TYX6

13063CYZ7

Additional information is available at www.fitchratings.com.

Applicable Criteria

Guidelines for Rating Prerefunded U.S. Municipal Bonds (pub. 09 Dec 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=818549

U.S. Municipal Structured Finance Criteria (pub. 23 Feb 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=862222

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=995842

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=995842

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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 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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20151202006441/en/

Fitch Ratings
Primary Analyst
Kasia Reed
Analytical Consultant
+1-212-908-0500 x5065
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Mario Civico
Senior Director
+1-212-908-0796
or
Committee Chairperson
Linda Friedman
Senior Director
+1-212-908-0727
or
Media Relations
Sandro Scenga, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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