Fitch Rates City of Roseville, California Electric System Rev Rfdg COPs 2008A&B 'AAA/F1+'

2008-05-09 22:39:08 -

- Fitch Ratings has assigned an 'AAA/F1+' rating to the City of Roseville, California electric system revenue refunding COPs, series 2008A and 2008B:

--$90,000,000 series 2008A;

--$64,500,000 series 2008B.

The rating is based on the rating of a direct-pay letter of credit (LOC) supporting the bonds and the application of Fitch's joint probability methodology. The long-term 'AAA' rating on the bonds is based jointly on the underlying rating assigned to the Roseville Electric System, rated 'A+' by Fitch, and the support provided by an irrevocable direct-pay LOC issued by Dexia Credit Local (rated 'AA+/F1+') securing the bonds. The short-term 'F1+' rating is based solely on the LOCs. For more information on the underlying credit please refer to the May 2 press release 'Fitch Rates Roseville, California's $155MM Electric System COPs 'A+'' available on the Fitch Ratings web site at www.fitchratings.com.

The long-term 'AAA' rating is based on Fitch's methodology, which considers the joint probability of the failure of both a rated obligor and a bank LOC provider. The methodology results in a rating that is up to two notches higher than the stronger of the two credits if the following conditions are 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 no more than a medium degree of correlation; Fitch has determined a low degree of correlation which results in a rating of 'AAA'. If either the Roseville Electric System or the Bank were downgraded to 'A-' or lower, the joint probability could no longer be applied and the long-term rating would then reflect the higher of the two ratings.

The bank is obligated to make payments of principal of and interest on the Bonds upon maturity and redemption, as well as the purchase price for tendered bonds. The LOCs provide full coverage of principal plus an amount equal to 52 days' interest at a maximum rate of 12% based on a year of 365/366 days and purchase price for tendered bonds. The ratings will expire upon the earliest of: (a) May 13, 2011, the initial stated expiration dates of the LOCs, unless such date is extended; (b) upon any prior termination of the LOCs; or (c) upon defeasance of the bonds. The underwriter for the bonds is Morgan Stanley. The Bonds are expected to be delivered on or about May 13, 2008.

The Bonds initially bear interest at a weekly rate mode, but may be converted to a daily, commercial paper, long-term, auction rate mode. While the bonds bear interest in the weekly rate mode, interest payments will be made on the first business day of each month, commencing June 2, 2008. Holders may tender their bonds on any business day with the requisite prior notice of the purchase.

The Bonds are subject to mandatory tender upon conversion of an interest rate mode, on the day after the end of the commercial paper rate period or long-term rate period and upon expiration, substitution, or termination of the LOC. Optional and mandatory redemptions provisions also apply to the bonds.

Bond proceeds will be used for refund certain outstanding obligations of the City relating to the Electric System.

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, New York
Richard Park, 212-908-0803
(the bonds)
Joanne Ferrigan, 212-908-0399
(Roseville Electric System)
or
Media Relations:
Cindy Stoller, 212-908-0526