Fitch Ratings on Tuesday downgraded the long-term debt rating for Florida Gas Utility’s Gas Supply Acquisition Project No. 2 revenue bonds to AA-minus from AA.
The outlook on the Series 2006 bonds remains negative, while Fitch affirmed the short-term rating at F1-plus.
The FGU action follows Fitch’s downgrade of UBS AG’s long-term issuer-default rating on Tuesday to AA-minus with a negative outlook from AA. UBS’ short-term debt rating was affirmed at F1-plus.
UBS AG is the natural gas supplier to Florida Gas Utility in connection with the prepaid gas transaction that was financed with proceeds of the variable-rate bonds — $277.7 million of Series 2006A-1, $138.84 million of Series 2006A-2, $134.84 million of Series 2006A-3, and $134.84 million of Series 2006A-4.
The long-term rating and outlook on the bonds is determined by the long-term issuer-default rating and outlook of the natural gas supplier associated with the Series 2006 bonds, the Fitch report said.
“Based on the structured nature of the transaction, which includes an obligation by UBS AG to pay bondholders in the event of a payment default by the commodity swap provider, the long-term rating does not reflect that of the swap provider,” Fitch said.
The swap provider is Calyon, which is rated AA with a stable outlook.
Proceeds of the Series 2006 bonds were used to fund a 20-year natural gas prepay transaction between FGU and UBS AG. FGU is a joint-action agency that acquires, manages, and finances gas supplies for sale to its 23 members. The transaction provided gas supply on behalf of 16 members.