DALLAS - Fitch Investors Service on Friday rated San Antonio general obligation debt for the first time, assigning an AA to the bonds in advance of a $320 million refunding expected tomorrow.

The rating marks one more addition to the expanding number of major issuers in Texas now rated by Fitch, which soon hopes to begin rating lesser-known credits in the nation's third-largest municipal market.

"We've been down there quite a bit in the last year," said Amy S. Doppelt, senior vice president at Fitch.

Already, the agency has rated tax and utility debt for Houston, Fort Worth, and Austin and other well-known credits such as the Lower Colorado River Authority. Over all, the agency rates nearly $14 billion of debt sold by 34 issuers in the state.

Ms. Doppelt said that expanding the agency's Texas role continues to be part of Fitch's strategy two years after it began rating debt in the state.

Fitch's action on San Antonio GO bonds matches the ratings assigned by Moody's Investors Service and Standard & Poor's Corp.

The city has $658 million of outstanding GO debt and plans to refund at least $320 million in the negotiated offering beginning July 28. City officials have said they might refund up to $350 million if the additional debt generates at least a 5% present value savings.

Also, the city plans to sell a $19.1 million new-money issue of combination tax and revenue certificates of obligation. The deal will be underwritten by a team led by book-runner Paine Webber Inc. and Dean Witter Reynolds Inc.

Next month, the city's electric and gas utility expects to complete a refunding and commercial paper program that could exceed $600 million. The negotiated deal may break the city's own record as making the single largest transaction ever for a local issuer in Texas.

The deal is to underwritten by a team led by First Boston Corp. and Merrill Lynch & Co.

In assigning its GO rating, Fitch said the outlook for the nation's ninth largest city is stable.

"The economy continues to grow despite what's going on nationwide," said Ms. Doppelt. "The [stagnation] of the property tax base is the only economic indicator that's not positive."

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