Fitch Rates University of California Commercial Paper Program 'F1+'

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NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assigns an 'F1+' rating to the Regents of the University of California's (UC's) $2 billion taxable and tax-exempt commercial paper (CP) program.

At the same time, Fitch affirms the short-term ratings on various UC general revenue bonds (GRBs) as detailed at the end of this release.

SECURITY

CP notes are a limited obligation of UC, payable from pledged revenues, including advances from UC's short-term investment pool (STIP) and total return investment pool.

KEY RATING DRIVERS

--The short-term 'F1+' rating reflects UC's ability to internally manage variable-rate debt programs through a combination of significant liquid reserves and superior market access.

--UC's management team has a regularly updated set of liquidation procedures in place detailing the process by which a need for internal liquidity would be managed.

CREDIT PROFILE

Liquidity support for the CP program is derived from the strength of STIP holdings. As of Sept. 30, 2011, the market value of STIP holdings, primarily U.S. dollar denominated marketable, publicly traded, investment grade short-term fixed income instruments, notes, and debentures, totaled approximately $8.16 billion. Obligations issued or guaranteed by the federal government, including government sponsored corporations and agencies, make up a sizeable portion of STIP investments.

To manage potential calls on its liquidity presented by CP notes, the university has limited the amount of CP maturing daily to $200 million. Moreover, UC has committed to maintain at least $400 million of same day liquidity, namely in the form of U.S. Treasury and agency securities, within the STIP to support a failed remarketing of CP notes. Additional flexibility to raise liquid funds from other STIP portfolio holdings remains considerable, though conversion of certain assets to cash might not be immediate. Fitch reviewed UC's liquidation procedures plan and believes it adequately addresses the procedures to be followed in advance of maturing CP notes and mandatory tender dates, and for how a potential failed remarketing of variable-rate demand bonds would be addressed. A $250 million dedicated liquidity facility from JPMorgan Chase Bank, N.A. is also available to provide additional liquidity support to the CP program, though UC is not required to maintain such external support and the rating does not reflect external liquidity. The liquidity facility expires on March 30, 2012.

Fitch affirms the following ratings:

--$200 million GRBs 2010 series V (taxable Build America Bonds) (put structure) at 'F1+';

--$400 million GRBs 2011 series Y-1 (taxable floating-rate notes) at 'F1+';

--$100 million GRBs 2011 series Y-2 (taxable floating-rate notes) at 'F1+';

--$100 million GRBs 2011 series Z-1 (taxable variable-rate demand bonds) at 'F1+';

--$50 million GRBs 2011 series Z-2 (taxable variable-rate demand bonds) at 'F1+';

--$263.5 million GRBs 2011 series AA-1 (taxable fixed-rate notes, 1 year) at 'F1+';

--$286.5 million GRBs 2011 series AA-2 (taxable fixed-rate notes, 2 year) at 'F1+'.

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.

Applicable Criteria and Related Research:

--'Fitch Rates University of California General Rev Bonds 'AA+'; Outlook Stable (Aug. 11, 2011);

--'U.S. College and University Rating Criteria' (July 14, 2011);

--'Revenue-Supported Rating Criteria' (June 20, 2011);

--'Criteria for Assigning Short-Term Ratings Based on Internal Liquidity' (June 20, 2011).

For information on Build America Bonds, visit www.fitchratings.com/BABs.

Applicable Criteria and Related Research:

U.S. College and University Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=640830

Revenue-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=637130

Criteria for Assigning Short-Term Ratings Based on Internal Liquidity

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=637129

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

Fitch RatingsPrimary AnalystColin Walsh, +1 212-908-0767DirectorFitch, Inc.One State Street PlazaNew York, NY 10004orSecondary AnalystDouglas J. Kilcommons, +1-212-908-0740Managing Director and Sector HeadorCommittee ChairpersonDouglas Offerman, +1-212-908-0889Senior DirectororMedia Relations:Sandro Scenga, +1-212-908-0278Email: [email protected]

Source: Fitch Ratings

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