OREANDA-NEWS. On the effective date of May 8, 2015, Fitch Ratings will upgrade the long-term rating to 'AA+', from 'AA-' and confirm the short-term 'F1' rating assigned to the \$115,695,000 City of Austin, Texas water and wastewater system variable rate revenue refunding bonds series 2008. The Rating Outlook is Negative.

The rating action is in connection the substitution of the irrevocable direct-pay letters of credit (LOCs) previously provided by Bank of Tokyo and Mitsubishi UFJ, Ltd ('A/F1', Stable Outlook) and Sumitomo Mitsui Banking Corporation ('A-/F1', Stable Outlook), each covering 50%, with a substitute LOC from Citibank, N.A. ('A/F1', Stable Outlook).

KEY RATING DRIVERS

The long-term rating will now be determined using Fitch's dual-party pay criteria and will be based jointly on the underlying rating assigned to those bonds by Fitch (currently rated 'AA-', Negative Outlook), and the rating assigned by Fitch to Citibank, N.A. ('A/F1', Stable Outlook), which will provide the substitute LOC as support for the bonds. The short-term 'F1' rating will be based solely on the substitute LOC. For information about the underlying credit rating see press release dated May 27, 2014 available at 'www.fitchratings.com'.

Fitch's dual-party pay criteria consider the likelihood of the failure of both a rated obligor and a bank LOC provider. The methodology results in a long-term 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 between the banks and the obligor which results in a rating of 'AA+' for the bonds. If either the underlying bond rating or the bank rating were downgraded to 'A-' or lower, the dual-party pay criteria could no longer be applied, and the long-term rating assigned to the bonds would then be adjusted to the higher of the bank rating and the underlying bond rating.

Pursuant to the substitute LOC, the bank is obligated to make regularly scheduled payments of principal of and interest on the bonds in addition to payments due upon maturity, acceleration and redemption, as well as purchase price for tendered bonds. The ratings will expire upon the earliest of: (a) Oct. 15, 2018, the initial stated expiration date of the substitute LOC, unless such date is extended; (b) conversion from the weekly rate mode; (c) any prior termination of the LOC; and (d) defeasance of the bonds. The substitute LOC provides full and sufficient coverage of principal plus an amount equal to 50 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. A mandatory tender of the bonds will occur on the substitution date May 8, 2015. The Remarketing Agent for the bonds is Goldman, Sachs & Co.

RATING SENSITIVITIES

As described above, the long-term rating is tied to the long-term rating assigned to the bonds and the long-term rating that Fitch maintains on the bank providing the substitute LOC. Changes to one or both of these ratings may affect the long-term rating assigned to the bonds.

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