Fitch Rates Canadian River Municipal Water Auth, Texas $22MM Contract Revs 'AA-'

AUSTIN, Texas--(Business Wire)--
Fitch Ratings has assigned an 'AA-' rating to the $21.6 million contract revenue
bonds, series 2009 (conjunctive use groundwater supply project) of the Canadian
River Municipal Water Authority, Texas (the authority). The bonds are scheduled
to sell the week of Oct. 12 via negotiation. At this time, Fitch also affirms
its 'AA-' rating on the authority's outstanding contract revenue bonds as
follows:

--$125.4 million conjunctive use groundwater supply project;

--$10.3 million U.S. Bureau of Reclamation prepayment project;

--$275,000 Lake Meredith salinity control project.

The Rating Outlook is Stable.

The current bonds are secured by an irrevocable first lien on and pledge of
project payments derived from member cities pursuant to respective conjunctive
use groundwater supply agreements. Project payments by member cities are an
operations and maintenance expense of their respective utility, payable prior to
debt service on the member cities' own bonds. Proceeds will be used to finance
the expansion of the authority's conjunctive use groundwater supply project.

The 'AA-' rating reflects the authority's successful operating history, the
essential nature of water supplied by the authority's projects, and the strong
legal protections provided by the project contracts and bond resolution. The
rating also reflects the strength of the authority's two largest members,
Amarillo and Lubbock, which can cover the payments of other member cities if
they are unable to pay. While both Amarillo and Lubbock's respective utilities
have exhibited strong credit profiles in the past, Lubbock's water utility has
weakened significantly over the last few years. Further erosion in the credit
profile of Lubbock's water utility and/or a weakening of Amarillo's combined
water and sewer utility could adversely affect the rating on the authority's
bonds.

The authority was organized in 1953 as a conservation and reclamation district
to provide a source of water supply for its 11 member cities in the panhandle
and south plains regions of Texas. The members are Amarillo, Borger, Brownfield,
Lamesa, Levelland, Lubbock, O'Donnell, Pampa, Plainview, Slaton, and Tahoka. In
addition to the water supplied by the authority, some member cities augment
water resources through their own water supply projects. The authority functions
as a wholesale provider of raw water, with the member cities providing for
treatment and distribution separately.

The authority has undertaken three major projects to address the quantity and
quality of water supplied to its member cities. This financing will increase the
delivery capacity of the authority's conjunctive use groundwater supply project.
A separate contractual agreement for each project governs the payments made by
member cities to secure the authority's debt, to provide for payment of the
authority's operating costs, and to regulate the allocation of water. Members
may elect, on a project-by-project basis, to participate in the authority's bond
financings or to make a cash deposit in escrow for their share of project
construction costs. Members choosing to pay cash are not relieved of their
obligation to pay operating expenses.

Member cities remit payments to the authority for their proportionate share of
debt-financed projects, which is a fixed cost, as well as their share of
operations and maintenance costs for pumping and transportation of water.
Payments by members to the authority, whether for debt service or operations of
the authority, are a contractual operating expense of the cities' utility
systems; the members are obligated to make up for nonpayment by defaulting
members on a pro rata basis. In the event of nonpayment by a member city, that
city's water rights will be transferred to those cities making up the payments.
The agreements have been validated in the Texas courts.

Amarillo and Lubbock will account for around 41% and 37%, respectively, of the
debt service for this transaction. Amarillo has a very strong water and sewer
system characterized by sound liquidity, solid historical debt service coverage,
and a stable and growing economy. Lubbock's water system, while historically
producing sound margins, has experienced softening in recent years as the city
has issued a sizeable amount of debt for new supplies. This has led to rising
fixed costs, narrowing debt service coverage and declining liquidity. A
significant amount of additional debt is planned over the next few years, which
could erode financial margins further. If this occurs, it could have an impact
on the credit quality of the authority's bonds.

Additional information is available at 'www.fitchratings.com'.

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Fitch Ratings, Austin
Doug Scott, 512-215-3725
Julie Seebach, 512-215-3740
or
Media Relations:
Cindy Stoller, 212-908-0526, New York
Email: cindy.stoller@fitchratings.com

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