Fitch Rates Castaic Lake Water Agency (California) 2008A COPs (1994 Rfdg Project) 'AAA/F1+'

2008-04-25 00:05:41 -

- Fitch Ratings has assigned a rating of 'AAA/F1+' to the Castaic Lake Water Agency's (the Agency) $44,170,000 adjustable-rate refunding revenue certificates of participation (COPs), series 2008A (1994 Refunding Project).

The long-term 'AAA' rating is based jointly on the long-term 'A+' rating assigned to the Agency's parity lien COPs. For more information, see the April 23 press release ('Fitch Rates Castaic Lake Water Agency, California $44M Rev COPs 'A+' Underlying') available at www.fitchratings.com. The 'AAA' rating is also based on the support provided by an irrevocable, direct-pay letter of credit (LOC) issued by Wells Fargo Bank, National Association rated 'AA/F1+, securing the bonds. The short-term 'F1+' rating is based solely on the LOC. The bank is obligated to make payments of principal, interest and purchase price when due. The rating on the bonds will expire upon the earliest of: May 6, 2013, the expiration date of the LOC, unless extended; any prior termination of the LOC; or defeasance of the bonds.

The long-term 'AAA' rating is based on Fitch's methodology, which considers the likelihood of the failure of both a rated obligor and a bank LOC provider. The methodology results in a rating that may be one or two notches higher than the stronger of the two credits, depending upon the level of correlation between the two entities: a low correlation results in a rating two notches higher than the stronger of the two credits; while a medium correlation results in a rating one notch higher.

In addition, the following conditions must be met: (1) both entities have a rating of 'A' or higher; (2) the transaction is structured such that payments from both the municipal issuer and the bank are in the flow of funds and both entities would have to fail to perform before the bonds defaulted; and (3) the credit of the bank and the rated obligor have a no more than a medium degree of correlation. In this instance the degree of correlation results in a rating that is two notches higher than the stronger of the two credits. If either the underlying rating of the COPs or the rating of Wells Fargo Bank, National Association were to be downgraded to 'A-' or lower, the joint probability methodology would no longer be applicable and the long-term rating would then reflect the higher of the two ratings.

The LOC provides full coverage of principal plus an amount equal to 50 days of interest computed at a maximum rate of 12%, based on a year of 365 days, and purchase price for tendered bonds. The series 2008A bonds are expected to be available for delivery on or about May 6, 2008. The remarketing agent for the bonds is Citigroup Global Markets, Inc.

The bonds will bear interest in a weekly rate mode, but may be converted to a daily, bond interest term, long-term interest rate or auction rate mode. While bonds bear interest in the weekly rate mode, interest payments are paid on the first Wednesday of each calendar month, commencing June 4, 2008 and bondholders have the option to tender their bonds on any business day, with the requisite prior notice. The bonds are subject to mandatory tender on (1) conversion of the interest rate mode, (2) on the day next succeeding the last day of each bond interest term, and (3) the expiration, termination or substitution of the LOC or upon the occurrence of an event of default under the LOC Reimbursement Agreement directing the Trustee to cause a mandatory tender of the Bonds.

Optional and mandatory redemption provisions also apply to the bonds.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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 Ratings
series 2008A:
Linda Friedman, +1-212-908-0727 (New York)
or
Castaic Lake Water Agency:
Doug Scott, +1-512-215-3725 (Austin)
or
Media Relations:
Cindy Stoller, +1-212-908-0526 (New York)