November 8, 2012 / 10:11 PM / 5 years ago

TEXT-Fitch rates Calif. $421 mln GO bonds 'AAApre'

Nov 8 - Fitch Ratings has assigned a rating of 'AAApre', Negative Outlook to
the $421,360,000 State of California (the state) general obligation (GO) bonds,
refunded on Oct. 4, 2012 with proceeds of the state's various purpose general
obligation refunding bonds.

The State Treasurer holds an account, established by the State Controller within
the state's escrow fund, in trust for the benefit of the refunded bondholders.
All funds and securities held in this account are pledged irrevocably to the
payment when due of interest on the refunded bonds and principal upon
redemption. The 'AAApre', Negative Outlook rating reflects this pledge and that
all funds have been invested in direct non-callable obligations of the United
States. The U.S. full faith and credit rating is currently rated 'AAA', Negative
Outlook by Fitch. In the future, any substitute investments may also include
senior unsubordinated direct obligations of the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation that are non-callable
and non-prepayable. In addition, up to $5,000 may be held in the State's Surplus
Money Investment Fund.

Grant Thornton verified the mathematical accuracy of computations relating to
the adequacy of income from escrowed funds and securities to pay debt service
requirements of the refunded bonds. These computations were contained in
schedules provided to them by RBC Capital Markets, LLC, underwriter for the
refunding bonds. According to the Grant Thornton verification report, the
securities and cash deposited will produce amounts necessary to provide for
timely payment of the debt payment schedule on the refunded bonds. Prior to
accepting substitute or additional investment securities or disbursing funds to
the State, the escrow agent must receive a new report verifying the continued
sufficiency of escrowed funds to meet all future payments of principal and
interest on the refunded bonds.

The 'AAApre' rating applies to the bonds with the following CUSIP numbers:


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

Applicable Criteria and Related Research:
--'U.S. Municipal Structured Finance Rating Criteria', Feb. 28, 2012;
--'Guidelines for Rating Pre-Refunded Municipal Bonds', Dec. 14, 2011.

Applicable Criteria and Related Research:
U.S. Municipal Structured Finance Criteria
Guidelines for Rating Prerefunded U.S. Municipal Bonds
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