Fitch affirms Utility Contract

Fitch Ratings said it affirmed Utility Contract Funding, LLC's $829.3 million senior secured bonds due 2016 at BBB+ as a result of the structural balance of the contractual agreements and the credit quality of the counterparties Public Service Electric & Gas (PSE&G) and Morgan Stanley.

The ratings are constrained by the lower of two credit ratings of counterparties PSE&G and Morgan Stanley, Fitch said.

The project's risk exposure is effectively limited to PSE&G's payment under the power purchase agreement, the agency said, and Morgan Stanley's guarantee of Morgan Stanley Capital Group's payment of liquidated damages under the mirror purchase agreement.

There is no performance risk associated with this transaction due to the obligation by Morgan Stanley Capital Group to schedule, sell and deliver annual quantities of energy or pay liquidated damages as set forth by the mirror purchase agreement, Fitch said.

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