BRADENTON, Fla. — Fitch Ratings on Friday upgraded the long-term debt rating on Florida Gas Utility’s Series 2006 gas supply acquisition bonds to AA from AA-minus as a result of a $980 million collateral posting by its gas supplier, UBS AG. Fitch said UBS on April 7 posted collateral equal to 102% of bond and swap-related exposure after FGU requested the required posting following rating downgrades for UBS. Bond documents allowed FGU to seek the collateral if UBS was downgraded by two or more rating agencies, to below AA by Fitch and Standard & Poor’s, and Aa3 by Moody’s Investors Service. FGU’s Series 2006 bonds were downgraded to AA-minus due to the downgrade for UBS. Florida Gas Utility in 2006 sold $670 million of variable-rate demand bonds for a prepaid gas purchase agreement with several unique aspects, including a proprietary combined-commodity rate swap. At the time of FGU’s 2006 offering, ratings were based on UBS’ credit. It was rated AA-plus by Fitch and Standard & Poor’s. Over the past few months as problems with subprime securities unfolded, those ratings were lowered to AA-minus by Fitch and Standard & Poor’s. “The collateral posted is sufficient to redeem bondholders or enter into a replacement Gas Purchase Agreement,” Fitch said Friday. “The posted collateral serves as security for all payment and performance obligations of UBS AG and all other monetary claims that FGU may have against UBS AG.” FGU was created in 1989 as a nonprofit municipal public entity for the purpose of reducing the cost of purchasing natural gas for its members. The agency has 24 members. UBS had no comment on the collateral posting and FGU officials could not be reached for comment.
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