Amend: Fitch Rates Natural Gas Acquisition Corp. (Clarksville, TN) 2006 Bonds 'AA-'.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- (This amends a press release originally issued on Thursday June 8. The issuer name has been amended in both the headline and first paragraph.) Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. assigns an 'AA-' rating to the Natural Gas Acquisition Corporation (NGAC NGAC National Geospatial Advisory Committee NGAC National Greenhouse Advisory Committee (Australia) ) of the City of Clarksville, Tennessee's $240 million gas revenue bonds, series 2006. The proceeds from the transaction will be used to prepay a specified amount of natural gas for 15 years. The bonds will be issued as fixed-rate bonds and are expected to price the week of June 19, 2006 with Merrill Lynch serving as the sole underwriter. The 'AA-' rating is based on the transaction's structure, which includes a corporate guarantee, insurance policies, operating reserves, and certain legal provisions. These factors secure the revenue streams and other funds that pay debt service on the bonds, and under certain circumstances, the full redemption price Redemption price See: Call price redemption price 1. The price at which an open-end investment company will buy back its shares from the owners. In most cases, the redemption price is the net asset value per share. 2. . The rating on the bonds is influenced by the lower rating of Merrill Lynch (rated 'AA-' by Fitch) and XL Capital (rated 'AAA' by Fitch), and will move with Fitch's future assessment of these two entities. Fitch has evaluated several scenarios to determine the transaction's ability to make timely payments of interest and principal. Fitch notes that there are circumstances related to the level and volatility of natural gas prices and the mechanics of the transaction that could result in instances where there could be insufficient revenues to make required monthly deposits to the debt service fund. It is Fitch's view that these circumstances are sufficiently remote and the transaction is structured with adequate reserves and true-up mechanisms to support an 'AA-' rating. NGAC is a nonprofit corporation nonprofit corporation n. an organization incorporated under state laws and approved by both the state's Secretary of State and its taxing authority as operating for educational, charitable, social, religious, civic or humanitarian purposes. and instrumentality Instrumentality Notes issued by a federal agency whose obligations are guaranteed by the full-faith-and-credit of the government, even though the agency's responsibilities are not necessarily those of the US government. of Clarksville, TN. NGAC was originally created to acquire, finance and manage supplies of natural gas for Clarksville. Through this prepay transaction NGAC is acquiring a 15-year supply of natural gas for the City of Clarksville, and Humphreys County Utility District of Humphreys County, TN (together, the customers). The gas volumes represent a portion of the forecasted needs of the two gas distribution utilities. In addition to securing a gas supplier and gas supply for 15 years, the transaction benefits the customers by locking in natural gas costs at a discount to the regional market index price. Under separate purchase agreements between NGAC and Merrill Lynch Commodities Inc. (MLCI MLCI Maxx Logistics for Commerce and Industry ), MLCI will deliver a specified amount of natural gas to NGAC for 15 years. Under separate gas supply contracts, NGAC will sell a predetermined pre·de·ter·mine v. pre·de·ter·mined, pre·de·ter·min·ing, pre·de·ter·mines v.tr. 1. To determine, decide, or establish in advance: amount of natural gas to the customers, who are both obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. to take-and-pay for gas as long as it is delivered. The price of the natural gas sold to Clarksville and Humphreys is structured to generate revenues sufficient to pay debt service on the bonds. Bondholders have a security interest in the payments from the customers to NGAC and in the scheduled natural gas from MLCI. A Merrill Lynch corporate guarantee secures performance by MLCI, including the delivery of gas. If MLCI does not perform its obligations under the purchase agreements (e.g. not delivering specified volumes of gas), MLCI is obligated to make required payments to NGAC which will cover debt service payments and ultimately the payment of the extraordinary redemption Extraordinary Redemption A provision which gives a bond issuer the right to call the bonds due to a one-time occurrence, as specified in the offering statement. The circumstances could range from natural disasters and cancelled projects to almost anything else. . XL Capital is providing separate insurance policies to guarantee Clarksville and Humphreys' payments for delivered natural gas. Each set of contracts (the customers' purchase agreements and supply agreements) are separate and operate independently of the other. The contracts are not cross-defaulted and a termination event of one contract does not necessarily cause a termination of the other customer's contracts. If a termination event occurred, only an allocable portion of the outstanding bonds would be redeemed. The remaining outstanding bonds would be secured by the remaining customer contracts. Since the contracts, insurance policies, and allocable operating reserves are similar for both customers, Fitch does not see the separate contracts structure as a meaningful credit factor. Payments on the bonds will be made semi-annually on the 15th of each June and December, beginning on Dec. 15, 2006. At closing, an operating reserve account will be established and funded at $2.5 million. The operating reserve account is available to cover shortfalls needed for debt service fund payments. If utilized, the operating reserve will be replenished to the required amount the following month. The bonds are subject to extraordinary redemption prior to maturity. Under circumstances (designated 'seller triggering events,' related to events such as a Merrill Lynch or MLCI bankruptcy or cross-default) or other events (designated 'no-fault termination events' such as changes in tax laws), the bonds will be called prior to the stated maturity Stated maturity For the CMO tranche, the date the last payment would occur at zero CPR. through the extraordinary redemption mechanism. The termination amount will equal an amount sufficient to pay bondholders plus a penalty payment in some instances (ultimately covering all principal, unamortized premium, and accrued interest Accrued Interest The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date. There are two methods for calculating accrued interest: 1) 360-day year method, used for corporate and municipal bonds. ). The funds required to pay the redemption price will be provided by MLCI and are guaranteed by Merrill Lynch. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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