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Fitch Rates PSE&G Transition Funding II LLC, Series 2005-1

Posted on: Friday, 23 September 2005, 18:00 CDT

Fitch Ratings rates PSE&G Transition Funding II LLC, series 2005-1 as follows:

-- $25,200,000 4.18% class A-1 transition bonds 'AAA';

-- $35,000,000 4.34% class A-2 transition bonds 'AAA';

-- $20,000,000 4.49% class A-3 transition bonds 'AAA';

-- $22,500,000 4.57% class A-4 transition bonds 'AAA'.

The collateral securing the bonds consists primarily of a property right to receive a per kilowatt-hour charge (transition bond charge, or TBC) to be collected from Public Service Electric and Gas Company's (PSE&G) retail electricity customers.

The ratings are based on the strength and stability of the underlying tariff cash flows as established by the New Jersey statute which establishes the irrevocable and non-bypassable TBC and defines bondholders' property right to the collateral; and the New Jersey Board of Public Utilities (BPU) financing order which authorizes PSE&G to issue transition bonds and impose the TBC in an amount sufficient to recover the principal and interest on the bonds as well as any other costs of issuance, such as providing for credit enhancement, servicing fees, or other expenses.

Credit enhancement is provided by a capital sub-account equal to 0.5% of the original principal balance, funded at closing, and a reserve sub-account, funded with excess spread, if available, throughout the term of the transaction. The statute and financing order provide for a TBC adjustment mechanism (true-up) to keep principal amortization and funding of the capital sub-account in line with expected balances.

Payment of the bonds is not guaranteed by the state of New Jersey or any agency of the state. However, the state pledges not to limit, alter, impair, or revoke the TBC until the transition bonds are paid in full.

PSE&G (rated 'A-', with a Stable Rating Outlook by Fitch as of Dec. 20, 2004) is an operating gas and electric public utility incorporated in New Jersey that serves approximately 2.1 million customers in a service territory that encompasses approximately 2,600 square miles.

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.

Source: Business Wire

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