OREANDA-NEWS. Fitch Ratings has revised the ratings assigned to the outstanding bonds issued by the California County Tobacco Securitization Agency, (Fresno County Tobacco Asset Securitization Authority), Series 2006; due to the discovery of a model input error and resulting model input correction. The rating revisions are as follows:

--2006A to 'B-sf' from 'BBB+sf'; Outlook to Negative from Stable;
--2006B to 'B-sf' from 'BBBsf'; places on Rating Watch Negative; and
--2006C to 'B-sf' from 'BBsf'; places on Rating Watch Negative.

KEY RATING DRIVERS
The rating revisions relate to the discovery of an inaccurate model input utilized in Fitch's cash flow modelling of the bonds. In the last four annual reviews of the bonds, Fitch incorrectly overestimated the amount of the Master Settlement Agreement (MSA) payments allocated to the Fresno County trust. The county of Fresno has pledged 75% of its tobacco settlement revenues (TSRs); however, in the last four annual reviews Fitch had applied 100% of the TSRs to the trust, resulting in higher ratings.

In addition, the 2006B and 2006C bonds have been placed on Rating Watch Negative pending the outcome of the previously announced revision of Fitch's tobacco settlement ABS rating criteria (see Fitch's press release dated July 22, 2015). The criteria revision could potentially result in downgrades for the 2006B and 2006C bonds to a level below the current rating floor of 'B-sf'. Fitch expects that the revised criteria will be published at the end of this month. At that time, Fitch will resolve the outstanding Rating Watch status of the bonds.

The ratings are based on the level of stress each class is able to withstand as indicated by Fitch's breakeven cash flow model. The model indicates, for each class of bond, the level of the annual MSA payment percentage change the trust would be able to sustain and still pay the bond in full by the legal final date. The cash flow accounts for the amount of the MSA payment that the transaction has received in 2015, the capital structure, the reserve account, and the bond's legal final dates.

RATING SENSITIVITIES
Fitch runs different declines in MSA payment scenarios when evaluating the rating sensitivity for tobacco settlement ABS. For further discussion of Fitch's sensitivity analysis, please see the related presale report for this transaction.

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.