OREANDA-NEWS. Fitch Ratings has downgraded the short-term rating to 'F1' from 'F1+' for the $100,000,000 City of Houston, Texas combined utility system commercial paper notes, series B-1. The rating action is in connection with the substitution of the revolving credit agreement (RCA) previously provided by JPMorgan Chase Bank, N.A. (rated 'AA-/F1+', Stable Outlook) with a substitute RCA to be issued by Bank of America, N.A. (rated 'A+/F1', Stable Outlook). A maximum of $100,000,000 aggregate principal amount of authorized notes may be outstanding at any given time.

KEY RATING DRIVERS
The short-term 'F1' rating assigned to the series B-1 notes is based on the support provided by a revolving credit agreement provided by Bank of America, N.A., which has a stated expiration date of Jan. 8, 2019, unless extended or earlier terminated. The Bank of America substitute RCA provides coverage for the principal amount of the notes plus 270 days of interest coverage calculated at 12% based on a 365 day year. The rating assigned to third lien obligation of the City of Houston Combined Utility System is 'AA-', Stable Outlook.

U.S. Bank, National Association, acting as Issuing and Paying Agent (IPA) will continue as the Issuing and Paying Agent for the notes, and as IPA, is directed to request an advance under the substitute RCA whenever proceeds of the sale of rollover notes are insufficient to pay maturing notes. The substitute RCA provides sufficient coverage for the principal amount of notes and accrued interest on the notes.

All notes will be issued at par, with interest due at maturity. Following the occurrence of an event of default under the RCA, Bank of America may direct the IPA to immediately stop the issuance of any additional notes. In such event, the substitute RCA will expire after all the notes supported by such RCA mature and have been paid from funds drawn on the substitute RCA. In addition, the substitute RCA may be terminated by the bank upon the occurrence of specified immediate termination events. The dealers for the notes are Barclays Capital, Citigroup, Ramirez & Co., Inc., Rice Financial Products, and J.P. Morgan Securities, Inc.

RATING SENSITIVITIES

The rating reflects the short-term rating that Fitch maintains on the substitute bank providing liquidity support and will be adjusted upward or downward in conjunction with changes to the short-term rating of the bank and in some cases, the long-term rating of the issuer.