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Fitch Rates New York City Muni Water Finance Auth's $275MM Fiscal 2011 Ser DD Bonds 'AA+/F1+'

NEW YORK, Nov 12, 2010 (BUSINESS WIRE) -- Fitch Ratings assigns a rating of 'AA+/F1+' to the $275,000,000 New York City Municipal Water Finance Authority (NYW), water and sewer system second general resolution (SGR) revenue adjustable rate bonds Fiscal 2011 series DD, consisting of: --$100,000,000 Fiscal 2011 subseries DD-1 adjustable rate bonds; --$75,000,000 Fiscal 2011 subseries DD-2 adjustable rate bonds; --$50,000,000 Fiscal 2011 subseries DD-3A adjustable rate bonds; --$50,000,000 Fiscal 2011 subseries DD-3B adjustable rate bonds.

In addition, Fitch affirms the underlying long-term rating on the following outstanding NYW bonds: --Approximately $10.2 billion first general resolution revenue (FGR) bonds 'AA+'; --Approximately $14.5 billion SGR revenue bonds 'AA+'.

The Rating Outlook is Stable.

Long-term Rating & Outlook Rationale: --NYW's primary credit strength is its unique legal structure, including its status as a bankruptcy-remote issuer, providing substantial protection to bondholders from utility system and city municipal operating risks.

--NYW benefits from a large and diverse service area and enjoys an abundant quality water supply exempt from costly filtration requirements.

--NYW's strong capital planning efforts have helped achieve compliance with large, costly mandated regulatory projects and kept the full capital plan moving forward in a timely manner.

--Prudent financial management and a proven ability to raise rates are reflected in consistently solid financial results.

Key Long-Term Rating Drivers: --Stability in the current rating will depend on NYW's ability to continue absorbing additional debt while maintaining its current financial profile.

--Fitch remains concerned regarding the continuation of below-average collection rates, although NYW has implemented several measures in recent years aimed at improving receipt of charges. Continued improvement in this area is expected.

Short-term Rating Rationale: The short-term 'F1+' rating is based on the liquidity support in the form of Standby Bond Purchase Agreements (SBPAs) provided by TD Bank, National Association ('AA-/F1+', Stable Outlook) for subseries DD-1, The Bank of New York Mellon ('AA-/F1+', Stable Outlook) for subseries DD-2, U.S. Bank, National Association ('AA-/F1+', Stable Outlook) for subseries DD-3A, and California State Teachers' Retirement System ('AA+/F1+', Stable Outlook) for subseries DD-3B.

The SBPAs provide for the payment of the principal component of purchase price plus an amount equal to 35 days of interest calculated at a maximum rate of 9%, based on a year of 365 days for tendered bonds during the daily and weekly rate modes in the event that the proceeds of a remarketing of the bonds are insufficient to pay the purchase price following an optional or mandatory tender. The SBPAs will expire on Nov. 18, 2013, the stated expiration date, unless such date is extended, conversion to a rate mode other than daily and weekly; or upon the occurrence of certain other events of default which result in a mandatory tender or other termination events related to the credit of the bonds which result in an automatic and immediate termination. The short-term 'F1+' rating will expire on the expiration or prior termination of the SBPAs.

The short-term rating may be adjusted upward or downward in conjunction with the long-term rating of the bonds or the short-term rating of the bank. The remarketing agents for the bonds are TD Bank, NA (subseries DD-1), Wells Fargo Bank, National Association (subseries DD-2), and U.S. bank, National Association (subseries DD-3). The bonds are expected to be delivered on or about Nov. 18, 2010.

The bonds will be issued in the daily rate mode, but may be converted to a weekly, commercial paper, flexible or fixed rate. While bonds bear interest in the daily or weekly rate mode, interest is paid on the 15th calendar day of each month, commencing Dec. 15, 2010. Holders of bonds bearing interest in the daily and weekly rate modes may tender their bonds for purchase with the requisite prior notice. The trustee/tender agent is obligated to make timely draws on the SBPAs to pay purchase price in the event of insufficient remarketing proceeds, and in connection with the expiration or termination of the SBPAs, except in the case of the credit-related events permitting immediate termination or suspension of the SBPAs.

Funds drawn under the SBPAs are held uninvested, and are free from any lien prior to that of the bondholders. Bonds are subject to a mandatory tender: (1) on each interest rate mode conversion date; (2) on each interest reset date for bonds in the commercial paper and flexible rate modes; (3) upon the expiration or earlier termination of the SBPAs and (4) on any substitution of the SBPAs which results in a reduction or withdrawal of the ratings assigned to the bonds.

Optional and mandatory redemption provisions also apply to the bonds pursuant to the terms of the documents.

Bond proceeds will be used by NYW to pay: (i) amounts due on its outstanding Commercial Paper, and (ii) construction projects.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research: --'U.S. Municipal Structured Finance Rating Criteria', Aug.16, 2010; --'Rating Guidelines for Variable-Rate Demand Obligations Issued with External Liquidity Support', May 29, 2009; --'Revenue-Supported Rating Criteria', dated Dec. 29, 2009; --'Water and Sewer Revenue Bond Rating Guidelines', dated Aug. 6, 2008.' Applicable Criteria and Related Research: Revenue-Supported Rating Criteria http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=564565 U.S. Municipal Structured Finance Rating Criteria http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548588 Rating Guidelines for Variable-Rate Demand Obligations Issued with External Liquidity Support http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=443146 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.

PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 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.

SOURCE: Fitch Ratings CONTACT: Fitch Ratings Primary Analyst Joseph Staffa, +1-212-908-0829 Senior Director Fitch, Inc. One State Street Plaza New York, NY 10004 or Secondary Analyst Christopher Hessenthaler, +1-212-908-0773 Director or Committee Chair Trudy Zibit, +1-212-908-0689 Managing Director or Media Relations, New York Cindy Stoller, +1-212-908-0526 cindy.stoller@fitchratings.com Copyright Business Wire 2010 -0- KEYWORD: United States

North America

New York INDUSTRY KEYWORD: Energy

Utilities

Professional Services

Banking

Finance SUBJECT CODE: Bond/Stock Rating