Fitch to Downgrade S-T Rating to 'F1' on Houston, TX Airport System Sr Lien CP Notes Series A & B

On the effective date of Dec. 15, 2016, Fitch Ratings will downgrade the short-term rating assigned to the $150,000,000 City of Houston, TX airport system senior lien commercial paper notes series A (AMT)and series B (Non-AMT)(notes) to 'F1' from 'F1+'. A maximum of $150,000,000 aggregate principal amount of authorized notes may be outstanding at any given time.

The rating action is in connection with (i) the substitution of the current irrevocable direct-pay letter of credit (LOC) provided by Royal Bank of Canada (rated 'AA/F1+', Negative Outlook) supporting the notes, with a LOC to be provided by Sumitomo Mitsui Banking Corporation, acting through its New York Branch (SMBC, rated 'A/F1' Negative Outlook) and (ii) the reoffering of the notes.

KEY RATING DRIVERS

On the effective date, the 'F1' rating on the series A and B notes will be downgraded based on the support provided by a LOC to be provided by SMBC which has a stated expiration date of Dec. 15, 2021, unless extended or earlier terminated. The SMBC substitute LOC provides coverage for the principal amount of the notes and interest on the maturity dates of the notes.

U.S. Bank Trust, N.A. acting as Issuing and Paying Agent (IPA) will continue as the IPA for the notes, and as IPA is directed to request an advance under the LOC to pay principal and interest on maturing notes. The substitute LOC provides sufficient coverage for the principal amount of notes and 270 days of interest calculated at 10% based upon a 365 day year.

All notes will be issued at par, with interest due at maturity. Following the occurrence of an event of default under the LOC, SMBC may direct the IPA to immediately stop the issuance of any additional notes. In such an event the LOC will expire after all the notes supported by the LOC mature and have been paid from funds drawn on that LOC. SMBC also has the option to issue a final drawing notice directing the IPA to draw on its LOC for the principal of and interest due on all notes outstanding in which case the LOC will expire on the earlier of (A) the 15th calendar day (or if such date is not a Business Day, the immediately succeeding Business Day) after the date on which the IPA received the final drawing notice and (B) the date on which the drawing resulting from the delivery of the final drawing notice is honored. The dealers for the notes continue to be J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Rice Financial Products Company and Loop Capital Markets LLC.

RATING SENSITIVITIES

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

Additional information is available at www.fitchratings.com.

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