OREANDA-NEWS. Fitch Ratings revises the long-term rating to 'AAA' from 'AA' and assigns a short-term rating of 'F1' to the $200,000,000 New York City general obligation (GO) bonds, adjustable rate, 2017 series A, subseries A-4 and the $50,000,000 subseries A-7. The Rating Outlook is Stable for the long-term rating.

KEY RATING DRIVERS

The long-term rating assigned to the bonds is based jointly on the underlying rating assigned to those bonds by Fitch (currently rated 'AA', Stable Outlook), and the support provided by the irrevocable letter of credit (LOCs) provided by Citibank, N. A. (rated 'A+/F1', Stable Outlook) for subseries A-4 and Bank of the West (rated 'A/F1', Stable Outlook) for subseries A-7. The short-term 'F1' ratings are based solely on the respective LOCs. For information about the underlying credit rating see press release dated July 28, 2016, 'Fitch Rates New York City's $1.1B GOs 'AA'; Outlook Stable,' available at 'www. fitchratings. com'.

Fitch's dual-party pay criteria consider the likelihood of the failure of both a rated obligor and a bank LOC provider. The methodology results in a long-term rating that is up to two notches higher than the stronger of the two credits if the following conditions are met: (1) both entities have a rating of 'A' or higher; (2) the transaction is structured such that payments from both the municipal issuer and the bank are in the flow of funds and both entities would have to fail to perform before the bonds defaulted; and (3) the interest rate modes to be covered by Fitch's rating provide for either a mandatory purchase at the end of each interest rate period, or a purchase demand option. A one or two notch uplift will apply to the long-term rating depending on the frequency of the purchase demand option or the duration of the interest rate period which concludes with a mandatory tender.

The bonds provide holders with a tender option consistent with a two notch uplift: (i) in the daily rate mode with notice delivered by 10:30 am NY time on the purchase date; (ii) in the weekly rate mode with seven days prior notice; and (iii) in the two-day rate mode with notice delivered by 3:00 pm NY time with at least two business day prior notice before the purchase date. Fitch will apply a two notch uplift which results in a long-term rating of 'AAA' for the bonds.

Pursuant to the LOCs, the banks are obligated to make payments of purchase price for tendered bonds, including bonds that are required to be tendered upon any failure of the City to provide funds to Bank of New York Mellon, as fiscal agent, for the payment of principal and interest on the bonds on a payment date. Each LOC will expire upon the earliest of Aug. 16, 2019, the initial stated expiration date of the LOCs, unless extended or earlier terminated. Each LOC provides full and sufficient coverage of principal plus an amount equal to 35 days of interest at a maximum rate of 9 % based on a year of 365 days and purchase price for tendered bonds, while in the weekly rate mode for subseries A-4 bonds and while in the daily, two-day or weekly rate mode for the subseries A-7 bonds. The remarketing agents for the bonds are Citibank for the subseries A-4 bonds and BNY Mellon Capital Markets LLC for the subseries A-7 bonds. The bonds are expected to be delivered on or about Aug. 18, 2016.

The subseries A-4 bonds initially bear interest at a weekly rate, and subseries A-7 bonds initially bear interest at the daily rate. Each subseries may be converted to a daily, two-day, commercial paper, stepped coupon, auction, term or fixed rate. While bonds bear interest in the weekly or daily rate modes, interest payments are on the first business day of each month, commencing Sept. 1, 2016. Funds drawn under the LOCs are held uninvested and are free from any lien prior to that of the bondholders.

Holders may tender their bonds on any business day, provided the tender agent and remarketing agent are given the requisite prior notice of the purchase. The bonds are subject to mandatory tender: (1) upon conversion of the interest rate other than a conversion, in whole, between the daily, two-day and weekly rate modes; (2) upon expiration or termination of the respective LOC; (3) upon substitution of the respective LOC if such substitution results in a reduction or withdrawal of the rating assigned to the bonds; (4) following the receipt of written notice from the bank of an event of default under the respective LOC directing such mandatory tender; and (5) upon failure by the City to timely provide funds to the Fiscal Agent at maturity or on a redemption date or interest payment date. Optional and mandatory redemption provisions also apply to the bonds. There are no provisions for the issuance of additional bonds.

Bond proceeds will be used to finance capital projects for the City.

RATING SENSITIVITIES

The long-term rating is tied to the long-term rating assigned to the bonds and the long-term rating that Fitch maintains on the bank providing the LOC. Changes to one or both of these ratings may affect the long-term rating assigned to the bonds. Additionally, if either the underlying bond rating or the bank rating were downgraded to 'A-' or lower, the dual-party pay criteria could no longer be applied, and the long-term rating assigned to the bonds would then be adjusted to the higher of the bank rating and the underlying bond rating.

The short-term rating is exclusively tied to the short-term rating that Fitch maintains on the bank providing the LOC and will reflect all changes to that rating.