Fitch Rates New York City Muni Water Finance Auth's $200MM Fiscal 2012 Ser A-1 & A-2 Bonds 'AA+/F1'

NEW YORK--(BUSINESS WIRE)--

Fitch Ratings assigns a rating of 'AA+/F1' to the $200,000,000 New York City Municipal Water Finance Authority (NYW), water and sewer system revenue bonds adjustable rate fiscal 2012 series A consisting of:

--$100,000,000 Fiscal 2012 subseries A-1 adjustable rate bonds;

--$100,000,000 Fiscal 2012 subseries A-2 adjustable rate bonds.

In addition, Fitch affirms the long-term rating on the following outstanding NYW bonds:

--$8.8 billion first general resolution revenue bonds at 'AA+';

--$17.7 billion second general resolution revenue bonds at 'AA+'.

The Rating Outlook is Stable.

KEY LONG-TERM RATING DRIVERS

Sound Legal Protections: NYW's primary credit strength is its unique legal structure, including its status as a bankruptcy-remote issuer, providing substantial protection to bondholders from utility system and city municipal operating risks.

Regional Provider of Essential Service: The combined system provides an essential service to a large and diverse service area and benefits from an abundant, high-quality water supply exempt from expensive filtration requirements and transmission costs.

Well Managed Capital Program: Sophisticated capital planning efforts have helped achieve compliance with large, costly mandated regulatory projects aiding the timely implementation of the large capital improvement plan (CIP).

Sole Rate Setting Authority: Strong financial management and a proven ability to independently raise rates are reflected in consistently solid financial results, despite some volatility in demand.

Highly Leveraged System: Debt levels are high with substantial additional borrowing plans over the medium term to comply with required environmental mandates.

Improved Collection Rates: Below average collection rates persist, although the implementation of payment incentives and enforcement mechanisms have yielded positive results in recent years.

WHAT COULD TRIGGER A RATING ACTION

Implementation of Sufficient Rate Increases Essential: Failure to achieve rate hikes sufficient to ensure adequate financial margins would be viewed negatively.

Higher than Currently Forecast Debt Levels: Escalation of debt levels beyond what is currently included in the five-year financial forecast.

For more information on Fitch's long-term rating on NYW, see Fitch's press release 'Fitch Rates New York City Muni Water Finance Authority's $458MM Revs 'AA+' dated Sept. 9, 2011, available on Fitch's web site at 'www.fitchratings.com'.

The short-term 'F1' rating assigned to both subseries of bonds is based on the liquidity support in the form of a Standby Bond Purchase Agreement (SBPA) provided by Mizuho Corporate Bank, Ltd. ('A/F1', Stable Outlook), acting through its New York Branch.

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 9%, based on a year of 365 days for tendered bonds of both subseries during the daily, two-day and weekly rate modes 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 the earliest of: Sept. 29, 2014, the scheduled termination date, unless such date is extended; conversion to a rate mode other than the daily, two-day and weekly; or the occurrence of certain other events of default which result in a mandatory tender or other termination events related to the credit of the bonds which result in an automatic and immediate termination. The short-term ratings assigned to both subseries of bonds will expire on the expiration or prior termination of the SBPA. The short-term ratings may be adjusted upward or downward in conjunction with the long-term rating of the bonds or the short-term rating of the bank providing the SBPA. The remarketing agent for the A-1 bonds is Barclays Capital Inc. and for the A-2 bonds is Wells Fargo Bank, N.A. The bonds are expected to be delivered on or about Sept. 29, 2011.

Both subseries of bonds will be issued in the daily rate mode, but may be converted to a two-day, weekly, commercial paper, flexible or fixed rate. While bonds bear interest in the daily, two-day or weekly rate mode, interest is paid on the 15th calendar day of each month, commencing Oct. 15, 2011. Holders of bonds bearing interest in the daily, two-day and weekly rate modes may tender their bonds for purchase with the requisite prior notice. The 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. Bonds are subject to a mandatory tender: (1) on each interest rate mode conversion date; (2) on each interest reset date for bonds in the commercial paper and flexible rate modes; (3) upon the expiration or earlier termination of the SBPA and (4) on any substitution of the SBPA which results in a reduction or withdrawal of the ratings assigned to the bonds. Optional redemption provisions also apply to the bonds pursuant to the terms of the documents.

Bond proceeds will be used by NYW to refund outstanding commercial paper and to pay costs of issuance.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Revenue-Supported Rating Criteria', dated June 20, 2011;

--'Water and Sewer Revenue Bond Rating Guidelines', dated Aug. 10, 2011;

--'2011 Water and Sewer Medians', dated Jan. 18, 2011;

--'2011 Outlook; Water and Wastewater Sector', dated Jan. 18, 2011;

--'Rating Guidelines for Variable Rate Demand Obligations Issued with External Liquidity Support', dated Feb. 28, 2011.

--'U.S. Municipal Structured Finance Rating Criteria', dated April 25, 2011.

Applicable Criteria and Related Research:

U.S. Water and Sewer Revenue Bond Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647331

2011 Water and Wastewater Medians

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=593285

2011 Outlook: Water and Wastewater Sector

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=593286

Rating Guidelines for Variable-Rate Demand Obligations Issued with External Liquidity Support

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=607665

U.S. Municipal Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=624129

Revenue-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=637130

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