OREANDA-NEWS. Fitch Ratings has assigned an 'A+/F1' rating to the School District of Philadelphia general obligation refunding bonds, series 2016A, 2016B and 2016C. The Rating Outlook is Stable for the long-term rating.

KEY RATING DRIVERS
The rating is based on the support provided by the irrevocable direct-pay letters of credit (LOCs) issued by Bank of America (rated 'A+/F1', Stable Outlook) for series 2016A and 2016B and PNC Bank, National Association (rated 'A+/F1', Stable Outlook) for series 2016C, which have an initial stated expiration date of June 1, 2018, unless such date is extended or earlier terminated, while the bonds are in the weekly interest rate mode only.

The banks are obligated to make regularly scheduled payments of principal of and interest on the bonds in addition to payments due upon maturity and redemption, as well as purchase price for tendered bonds. Each LOC provides full and sufficient coverage of principal plus an amount equal to 52 days of interest at a maximum rate of 12% based on a year of 365 days and purchase price for tendered bonds, while in the weekly rate mode. The Remarketing Agent for the series 2016A and B bonds is Merrill Lynch, Pierce, Fenner & Smith Incorporated and for the series 2016C is PNC Capital Markets LLC. The bonds are expected to be delivered on or about June 1, 2016.

The bonds initially bear interest at a weekly rate, but may be converted to a daily, flexible, term or fixed rate. While bonds bear interest in the weekly rate mode, interest payments are on the first business day of each month, commencing July 1, 2016. The fiscal agent is obligated to make timely draws on the LOC to pay principal, interest, and purchase price. Funds drawn under the LOC are held uninvested, and are free from any lien prior to that of the bondholders.

Holders may tender their bonds on any business day, provided the tender agent is given the requisite prior notice of the purchase. The bonds are subject to mandatory tender: (1) upon conversion of the interest rate; (2) upon expiration, substitution or termination of the LOC; (3) following receipt of written notice from the bank of an event of default under the reimbursement agreement, and (4) following receipt of notice from the bank that the interest component will not be reinstated directing such mandatory tender. The bank has the option of directing a mandatory redemption rather than a mandatory tender upon an event of default under the reimbursement agreement or non-reinstatement of LOC interest. Optional and mandatory redemption provisions also apply to the bonds. There are no provisions for the issuance of additional bonds.

Bond proceeds will be used to finance, together with other funds, a portion of the costs of currently refunding the school districts' general obligation series 2009C, 2010F, 2010G and 2010H bonds.

RATING SENSITIVITIES
The rating is exclusively tied to the long- and short-term rating that Fitch maintains on the bank providing the LOC and will reflect all changes to that rating.