Fitch to Confirm Winston-Salem, North Carolina's 2002B&C Var. Rate Water & Sewer Revs at 'AA/F1+'.

NEW YORK -- Effective April 1, 2009 Fitch Ratings will confirm the City of Winston-Salem, North Carolina's $108,570,000 variable rate water and sewer system revenue bonds, series 2002B and 2002C at 'AA/F1+'. Fitch will also confirm the 'AA' rating assigned to the city's outstanding water and sewer system revenue bonds. The Rating Outlook is Stable.

The rating actions are in connection with the substitution of the current standby bond purchase agreements (SBPAs) issued by Dexia Credit Local, acting through its New York Branch (Dexia), which provide liquidity for both series of bonds, with separate SBPAs issued by Branch Banking and Trust Company (BB&T). On the effective date of April 1, 2009, the short-term rating of both series of bonds will be confirmed at 'F1+' based on the BB&T SBPAs.

The city's 'AA' rating on the water and sewer system revenue bonds reflects the city's solid financial performance and flexibility, supported by large cash balances, competitive low rates even after future increases, water supply sufficient for the foreseeable future, and a service area with a strong economy. The rating also incorporates debt service coverage that remains weak for the rating category and the maintenance of an investment policy that includes equity investments, which exposes the city to potential volatility in investment earnings. After excluding investment income, consistent with the provisions of the bond indenture, projected coverage levels are thin, with net revenues providing between 1.2 times (x) and 1.5x coverage of debt service in fiscal years 2009-2014. The utility is a combination of Winston-Salem and Forsyth County's water and sewer systems, and has an estimated 111,371 water customers and 83,797 sewer customers. Water supply is plentiful, and raw water is supplied by the Yadkin River and Salem Lake.

The short-term rating for each series of bonds will expire upon the earlier of: March 31, 2012, the stated expiration date of each SBPA; or any prior termination of each SBPA. BB&T Capital Markets, a division of Scott & Stringfellow, LLC, is the remarketing agent for both series of bonds.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.