LOS ANGELES -- Fitch Investors Service Inc. lowered its ratings to A from A-plus last week on roughly $114 million of Los Angeles Unified School District certificates of participation, saying the downgrade reflects the district's limited financial flexibility.

The credit trend is now stable, Fitch said.

Fitch also assigned an A rating to $69.9 million of school district refunding COPS scheduled for competitive sale tomorrow. The district has received a commitment from Financial Security Assurance Inc. to insure the refunding certificates, the rating agency said.

Based on the credit enhancement, analysts for Moody's Investors Service and Standard & Poor's Corp. said they expect to provide triple-A ratings on the refunding certificates.

Fitch does not rate the claims-paying ability of FSA, said Amy S. Doppelt, a Fitch senior vice president. The only bond insurer rated by Fitch, Doppelt said, is Financial Guaranty Insurance Co. "Clearly, the district wanted an independent rating," she said.

In a release last Tuesday, Fitch said the certificates downgrade "reflects e district's limited financial flexibility, as a result of lower state assistance, overall economic weakness, and growing expenditure needs. While the district has closed sizable projected budget gaps recently, future financial pressures will continue."

A district official said the school system has moved toward more solid footing.

"Naturally we're disappointed anytime a rating is changed in that direction," said Henry Jones, budget director for the district. "However, we believe it is more a timing thing than a comment on our financial situation. We've used conservative approaches to achieve positive yearend balances. Fitch recognizes that we have turned the comer."

Jones said the district decided to obtain FSA insurance as "a protection policy for the investor."

Eric Friedland, an assistant vice president for FSA, said the district has "a lot of positives," including "a very low debt burden for a district that size, and a diverse and broad-based local economy." And the district's financial operations have been improving, he said.

Standard & Poor's downgraded the districts' COPS ratings to A from A-plus last February, citing the district's weakened general fund position.

"We certainly haven't changed our credit assessment of the district at this time," said Jeffrey J. Thiemann, a director of Standard & Poor's.

Moody's Investors Service has held an A rating on four separate district COPs issues ever since it downgraded the certificates from A1 in May 1991, said Karen Krop, a Moody's assistant vice president. Moody's had rated the district's outstanding general obligation bonds Aa, but those GOs reached full maturity on Nov. 1. As a result, "there are no ratings on GO bonds anymore" for the district, Krop said.

Moody's "sense is that the district appears to have stabilized its financial Operations," Krop said. "[District officials] appear to be on a track in which revenues and expenditures are more in balance."

The giant district has been the focus of a debate over whether it should be broken into at least seven smaller systems. Last July, a key California legislative committee rejected a measure to dismantle the district Proponents of the breakup said they would Probably mount an initiative to put the issue to a vote.

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