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Rating Action:

Moody's affirms P-1 on Lower Colorado River Authority's LOC-backed CP Notes, Series B and Taxable Series B

25 Jul 2018

New York, July 25, 2018 -- Moody's Investors Service has affirmed the P-1 letter of credit-backed rating on the Lower Colorado River Authority (LCRA) Commercial Paper Notes, Series B and Taxable Series B (the Notes) following a review of the amendment to the letter of credit (LOC) and the reimbursement agreement. The LOC is provided by State Street Bank and Trust Company (the Bank).

RATINGS RATIONALE

The rating on the Notes is based upon the LOC provided by the Bank; the structure and legal protections of the transactions which provide for timely payment of principal and interest to Note holders; and, Moody's evaluation of the credit quality of the Bank issuing the letter of credit. Moody's current long-term and short-term counterparty risk assessment of the Bank are Aa1(cr) and P-1(cr), respectively.

FACTORS THAT COULD LEAD TO AN UPGRADE

• Not Applicable

FACTORS THAT COULD LEAD TO A DOWNGRADE

• Moody's downgrades the short-term counterparty risk assessment of the Bank.

The Thirty-Seventh Supplemental Resolution authorizes the issuance of a maximum amount of $250,000,000 of commercial paper Notes, although pursuant to the Resolution no Notes may be issued if the aggregate principal at maturity plus accrued interest exceeds the stated amount available under the LOC. The stated commitment available under the LOC is $150,000,000. The Notes may be issued on either an interest-bearing basis or discount basis.

The Issuing and Paying Agent (IPA), The Bank of New York Mellon Trust Company, National Association will issue Notes upon receipt of issuance instructions from LCRA and the Note dealer. Each Note issued must mature no later than: (i) 270 days from the date of issuance; (ii) the 3rd business day preceding the expiration or termination of the LOC; or (iii) May 15, 2032, the Program Maturity Date. The interest rate on the Notes may not exceed 12% per annum. The IPA shall stop issuing Notes following its receipt of a No-Issuance Notice or a Final Drawing Notice from the Bank. Upon receipt of a No Issuance Notice the IPA shall cease issuing Notes unless and until such Notice is revoked or rescinded. The LOC does not terminate as a result of a No Issuance Notice. Upon receipt of a Final Drawing Notice the IPA shall cease issuing Notes and shall draw on the LOC for the payment at maturity of all outstanding Notes. The IPA shall hold such funds in a separate account uninvested to pay the Notes as they mature. The LOC will terminate on the earlier of: (i) fifteen (15) days following the IPA's receipt of such Final Drawing Notice or (ii) the date on which a drawing resulting from the delivery of a Final Drawing Notice is honored.

The IPA is instructed to draw on the LOC in accordance with its terms in order to receive funds from the Bank in order to make timely payment of Notes on each maturity date including a draw following receipt of a Final Drawing Notice. The Notes are not subject to redemption or acceleration prior to maturity. The Bank will be reimbursed for each draw with the proceeds from the sale of rollover Notes, or with funds from LCRA.

The LOC for the Notes has been sufficiently sized to cover outstanding principal plus accrued interest on the Notes at a maximum rate of 12% for up to 270 days. Conforming draws on the LOC received by the Bank at or prior to 10:30 a.m., Boston, Massachusetts time, on a business day will be honored by 1:30 p.m., Boston, Massachusetts time, on the same business day. Principal and interest drawings will be reinstated following the reimbursement of such drawings in the amount of such drawings. The LOC will terminate upon the earliest to occur of: (i) September 9, 2021; (ii) the date on which the Bank receives notice, accompanied by the LOC for cancellation, from the IPA that either (a) an alternate letter of credit has been substituted for the LOC in accordance with the terms of the Resolution or (b) there are no longer any Notes outstanding nor does LCRA intend to issue any additional Notes; or (iii) the earlier of (x) the 15th calendar day following the IPA's receipt of notice of a Final Drawing Notice or (y) the date on which a drawing resulting from the delivery of a Final Drawing Notice is honored.

Substitution of the LOC is permitted and requires that LCRA obtain written evidence from each rating agency then rating the Notes that the rating on the outstanding Notes will not be reduced or withdrawn as a result of the substitution of the LOC.

The principal methodology used in this rating was Rating Transactions Based on the Credit Substitution Approach: Letter of Credit-backed, Insured and Guaranteed Debts published in May 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Michael J. Loughlin
Vice President - Senior Analyst
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Jacek Stolarz
AVP-Analyst
Public Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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