News Column

Fitch Rates Eastern Municipal Water District, CA Revs Series 2014A 'AA/F1+'

May 30, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assigns a 'AA/F1+' rating to the $48,645,000Eastern Municipal Water District, California's refunding water and wastewater revenue bonds, series 2014A. The Rating Outlook is Stable for the long-term rating.

KEY RATING DRIVERS:

The long-term 'AA' rating is based on a subordinate lien on net system revenues with sound debt service coverage, very healthy liquidity, strong management, a solid service area and a high but manageable debt burden. For more information on the long-term rating, see Fitch's May 28 press release, 'Fitch Affirms Eastern Municipal Water District, CA's Sr. Revs at 'AA+'; Outlook Stable' available at 'www.fitchratings.com'.

The short-term 'F1+' rating is based on the liquidity support provided by Wells Fargo Bank, N.A. (rated 'AA-/F1+', Stable Outlook) in the form of a Standby Bond Purchase Agreement (SBPA).

The SBPA provides for the payment of the principal component of purchase price plus an amount equal to 35 days of interest calculated at a maximum rate of 12%, based on a year of 365 days for tendered bonds during the weekly rate mode in the event that the proceeds of a remarketing of the bonds are insufficient to pay the purchase price following an optional or mandatory tender. The SBPA will expire on June 11, 2017, the stated expiration date, unless such date is extended, conversion to a mode other than weekly rate; or upon the occurrence of certain other events of default which result in a mandatory tender or other termination events related to the credit of the bond obligor which result in an automatic and immediate termination. The short-term 'F1+' rating will expire on the expiration or prior termination of the SBPA. The remarketing agent for the bonds is Merrill Lynch, Pierce, Fenner & Smith. The bonds are expected to be delivered on or about June 11, 2014.

The bonds will be issued in the weekly rate mode, but may be converted to a daily, long-term, or bond interest term rate. While bonds bear interest in the weekly rate mode, interest is paid on the first Wednesday of each month, commencing July 2, 2014. Holders of bonds bearing interest in the weekly rate mode may tender their bonds for purchase with the requisite prior notice. The trustee/tender agent is obligated to make timely draws on the SBPA to pay purchase price in the event of insufficient remarketing proceeds, and in connection with the expiration or termination of the SBPA, except in the case of the credit-related events permitting immediate termination or suspension of the SBPA.

Funds drawn under the SBPA are held uninvested, and are free from any lien prior to that of the bondholders. The bonds are subject to mandatory tender: (1) upon conversion of the interest rate; (2) upon expiration, substitution or termination of the SBPA; and (3) following the receipt of written notice from the bank of an event of default under the SBPA, directing such mandatory tender. Optional and mandatory redemption provisions also apply to the bonds.

Bond proceeds will be used to provide funds to prepay all of the outstanding Eastern Municipal Water District Water and Sewer Revenue Refunding Variable Rate Certificates of Participation Series 2008E and to pay costs of issuance of the 2014A Bonds.

RATING SENSITIVITIES:

The short-term rating reflects the short-term rating that Fitch maintains on the bank providing liquidity support and will be adjusted upward or downward in conjunction with the short-term rating of the bank and, in some cases, the long-term rating of the bond obligor. The long-term rating is exclusively tied to the creditworthiness of the bond obligor 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' (Jan. 27, 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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=832395

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.



Fitch Ratings, Inc.

Primary Analyst

Joseph Staffa, +1-212-908-0829

Senior Director

33 Whitehall Street, New York, NY 10004

or

Secondary Analyst

Linda Friedman, +1-212-908-0727

Senior Director

or

Committee Chairperson

Trudy Zibit, +1-212-908-0689

Managing Director

or

Media Relations, New York

Elizabeth Fogerty, +1-212-908-0526

elizabeth.fogerty@fitchratings.com

Source: Fitch Ratings


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