Fitch Rts $55MM Eastern Muni Water Dist, California Water & Sewer COPs Ser 2008C 'AA/F1+'

Business Wire, June 2, 2008

NEW YORK -- Fitch assigns a rating of 'AA/F1 ' to the $55 million Eastern Municipal Water District, California, water and sewer revenue refunding variable rate certificates of participation (COPs) series 2008C. The long-term 'AA' rating on the COPs is based on Eastern Municipal Water District's (the district) long-term credit quality, while the 'F1 ' short-term rating is based on liquidity support provided by JPMorgan Chase Bank, National Association. Fitch also affirms the 'AA' long-term rating on the district's $434 million of outstanding parity COPs (net of refunding). The 2008C COPs are scheduled to sell via negotiation on June 18. The Rating Outlook is Stable.

The long-term 'AA' rating on the district is based on the district's favorable financial performance, rate flexibility, and good economic underpinnings. The rating also reflects the rising capital costs to address growth needs and the elevated level of nonrecurring connection revenues. While housing starts and resulting connection fees have cooled dramatically over the last year, the district has incorporated these reductions into its forecasting, and financial capacity is expected to remain strong.

The short-term 'F1 ' rating on the COPs is based on the liquidity support of a standby certificate purchase agreement (SCPA) provided JPMorgan Chase Bank, National Association. The SCPA provides for the payment of the purchase price of tendered COPs during the weekly rate mode in the event the proceeds of a remarketing of the COPs following an optional or mandatory tender are insufficient to pay the purchase price. The SCPA is sized to provide for the entire principal amount of the COPs, plus interest coverage of 35 days calculated at a maximum interest rate of 12%, based on a year of 365 days. The SCPA will expire on June 16, 2009 unless such date is extended, or upon the occurrence of other events of termination, all in accordance with its terms. Fitch's short-term rating expires on the expiration or termination of the SCPA. Citibank Global Markets Inc. is the underwriter and remarketing agent for the COPs.

The COPs will be issued in the weekly interest rate mode and may be converted to a fixed rate mode. While the COPs bear interest in the weekly rate mode interest will be paid on the first business day of each calendar month. Holders of COPs bearing interest in the weekly rate mode may tender their COPs on any business day, for purchase, with prior notice.

COPs are subject to mandatory tender: upon conversion to a fixed rate; and upon the expiration, termination or replacement of the SCPA. Optional and mandatory redemption provisions also apply to the COPs pursuant to the terms of the documents.

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.