Fitch Rates Agua Caliente Band of Cahuilla Indians(CA) 2008 Notes 'BBB'.

NEW YORK -- Fitch Ratings assigns a 'BBB' rating to the Agua Caliente Band of Cahuilla Indians, California's (the Tribe, or Agua) approximately $70 million senior secured notes, series 2008 and, in addition, affirms the following ratings:

--Issuer 'BBB-';

--Revenue bonds, series

--Senior secured notes, series 2006 and 2007, 'BBB'.

The bonds and notes are outstanding in the amount of $348 million and rank pari passu with the 2008 notes. The Rating Outlook is Stable.

A 'BBB-' issuer rating for Agua is supported by the stable operating history of its casinos, which are the Tribe's main economic driver and primary source of cash flows. Agua is the sole tribe in the state of California operating two casinos, with the potential to open a third facility should the terms of a re-negotiated gaming compact with the state permit. This gives the Tribe a unique advantage in the very competitive southern California gaming market, providing some level of diversification in the revenue stream relative to single-site gaming operations.

Based on fiscal 2007 gaming enterprise earnings before interest, taxes, depreciation and amortization (EBITDA), and pro forma for the $70 million 2008 note issuance, debt to EBITDA is expected to peak at 1.8 times (x). Debt to EBITDA is expected to drop over the projection period through fiscal 2012 due to a positive impact on cash flows from improvements at the Agua Caliente Casino (ACC), including a hotel facility and the addition of gaming positions. The completion of the ACC expansion project does not depend upon successful ratification of a re-negotiated state compact. Assuming no additional class III gaming devices are placed, Fitch believes that the additional leverage incurred to fund the project is manageable and credit metrics should remain consistent with a low investment grade issuer rating, with stress scenarios showing debt to EBITDA peaking slightly above 2x.

A 'BBB' rating is assigned to debt secured by a lien on the gaming enterprise cash flows. The transactions are rated one notch above the issuer rating due to credit enhancement provided by security covenants included in the legal documents associated with the transactions.

Offsetting the strengths in Agua's credit profile are two main concerns:

--Highly competitive operating environment with the potential for a significant increase in market supply pending voter approval of class III gaming compact amendments;