July 25, 2012 / 2:12 PM / 5 years ago

TEXT-Fitch to confirm Texas Veterans Bonds, 2010C 'F1' rating

 July 25 - On the effective date of Aug. 1, 2012, Fitch Ratings will confirm
the short-term 'F1' rating assigned to the State of Texas Veterans Bonds Series
2010C (the bonds). The short-term rating action is in connection with the
substitution of the liquidity support currently provided by Lloyds TSB Bank
(Lloyds, rated 'A/F1; Outlook Stable) in the form of a Standby Bond Purchase
Agreement (SBPA), with a substitute SBPA to be issued by Bank of
Tokyo-Mitsubishi UFJ (BOT, rated 'A-/F1'; Outlook Stable ). The long-term 'AAA';
Outlook Stable rating assigned to the bonds continues to be based upon the
rating assigned by Fitch to general obligation bonds of the State of Texas.
(Additional information on the State of Texas GO credit is available in Fitch's
press release dated July 24, 2012 'Fitch Rates Texas Water Dev Board State GO
Rfdg Bonds 'AAA'; Outlook Stable', available at 'www.fitchratings.com').

On the effective date, the short-term 'F1' rating will be based on the liquidity
support provided by BOT in the form of a substitute SBPA. The substitute SBPA
provides for the payment of the principal component of purchase price plus an
amount equal to 34 days of interest calculated at a maximum rate of 15%, based
on a year of 365 days for tendered bonds during the weekly rate mode, 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 substitute
SBPA will expire on the earliest to occur of: (i) July 31, 2015, unless such
date is extended, (ii) conversion to an interest rate mode other than the weekly
interest rate mode, or (iii) the occurrence of certain other events of default
which result in a mandatory tender or other termination events related to the
credit of the general obligation bonds of the State of Texas which result in an
automatic and immediate termination. The short-term 'F1' rating will expire on
the expiration or prior termination of the SBPA. 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. A mandatory tender of the bonds is
scheduled to occur Aug. 1, 2012, the SBPA substitution date. The remarketing
agent for the bonds is Morgan Stanley & Co. Incorporated.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:
--'U.S. Municipal Structured Criteria' (Feb. 28, 2012);
--'Rating Guidelines for Variable-Rate Demand Obligations Issued with External
Liquidity Support'
(Feb. 1, 2012).

Applicable Criteria and Related Research:
U.S. Municipal Structured Finance Criteria
Rating Guidelines for Variable-Rate Demand Obligations Issued with External
Liquidity Support

 (New York Ratings Team)

Our Standards:The Thomson Reuters Trust Principles.
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