TEXT-Fitch rates NYC Muni Water Finance Authority bonds 'AA+'

Thu Feb 14, 2013 5:56pm EST

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Feb 14 - Fitch Ratings assigns an 'AA+' rating to bank bonds corresponding
to the following series of water and sewer system (the system) second general
resolution (SGR) revenue bonds for New York City Municipal Water Finance
Authority (NYW) in the event of a future conversion to bank bonds:

--$100,000,000 adjustable rate fiscal 2008 series B, subseries B-1A bonds;
--$100,000,000 adjustable rate fiscal 2008 series B, subseries B-1B bonds;
--$135,000,000 adjustable rate fiscal 2008 series B, subseries B-3 bonds.

The Rating Outlook is Stable.

The rating is being assigned in connection with the following:
-- the execution of a standby letter of credit and reimbursement agreement
provided by The Bank of Sumitomo Mitsui Banking Corporation, acting through its
New York Branchdated March 1, 2013 and applicable to the fiscal 2008 series B,
subseries B-1A bonds;
-- the execution of a standby bond purchase agreement (SBPA) provided by the
Royal Bank of Canada dated March 1, 2013 and applicable to the fiscal 2008
series B, subseries B-1B bonds;
-- the extension of an SBPA currently provided by Bank of America, N.A.
applicable to the fiscal 2008 series B, subseries B-3 bonds.

The Rating Outlook is Stable.

SECURITY

The SGR bonds are special obligations of NYW, payable solely from and secured by
a subordinate lien on gross revenues of NYW. FGR bonds are secured by a first
lien on gross revenues of NYW.

KEY RATING DRIVERS

SOUND LEGAL PROTECTIONS: NYW's primary credit strength is its legal structure,
including its status as a bankruptcy-remote issuer, providing substantial
protection to bondholders from potential operating risks associated with the
system and New York City.

REGIONAL PROVIDER OF AN ESSENTIAL SERVICE: The combined system provides an
essential service to an exceptionally large and diverse service area and
benefits from an abundant, high-quality water supply exempt from expensive
filtration requirements and transmission costs.

INDEPENDENT RATE-SETTING AUTHORITY: Strong financial management and a proven
ability and willingness to independently raise rates are reflected in
consistently solid financial results, despite the continued volatility in
consumption.

WELL-MANAGED CAPITAL PROGRAM: Sophisticated capital planning efforts have helped
achieve compliance with large and costly mandated regulatory projects and
ensured the successful implementation of the large capital improvement plan.

HIGHLY LEVERAGED SYSTEM: Leverage is high as a result of having to comply with
environmental mandates and maintain a large urban system and its aging assets.
Declining but still sizeable debt plans programmed into the current capital plan
will keep debt levels elevated for the long term.

IMPROVED COLLECTIONS: Below-average collection rates persist, although payment
incentives and strong enforcement mechanisms have yielded positive results in
recent years.

RATING SENSITIVITIES

MAINTENANCE OF SUFFICIENT RATES: Failure to achieve rate hikes sufficient to
ensure adequate financial margins and maintain current debt service coverage
levels on senior and subordinate lien obligations would be viewed negatively.

DEBT LEVELS EXCEEDING PROJECTIONS: Escalation of debt levels beyond what is
currently included in the five-year financial forecast would place added
pressure on the system's debt profile.

Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

In addition to the sources of information identified in Fitch's U.S. Municipal
Revenue-Supported Rating Criteria, this action was additionally informed by
information from Creditscope.

Applicable Criteria and Related Research:
--'Revenue-Supported Rating Criteria' (June 12, 2012);
--'U.S. Water and Sewer Revenue Bond Rating Criteria' (Aug. 3, 2012);
--'2013 Water and Sewer Medians' (Dec. 5, 2012);
--'2013 Sector Outlook: Water and Sewer' (Dec. 8, 2011).

Applicable Criteria and Related Research:
Revenue-Supported Rating Criteria
U.S. Water and Sewer Revenue Bond Rating Criteria
2013 Water and Sewer Medians
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