Fitch Rates Elsinore Valley Muni Water District's (California) $55MM Var-Rate COPs 2008B 'AA+/F1+'.
The long-term 'AA+' rating is based on Fitch's methodology which considers the probability of the failure of both a rated obligor and a bank LOC provider. The methodology results in a rating that is up to two notches higher than the stronger of the two credits if the following conditions are met: (1) both entities have a rating of 'A' or higher; (2) the transaction is structured such that payments from both the municipal issuer and the bank are in the flow of funds and both entities would have to fail to perform before the COPs defaulted; and (3) the credit of the bank and the rated obligor have no more than a medium degree of correlation. In this instance, Fitch has determined a low degree of correlation which results in a rating of 'AA+/F1+' for the COPS. If either the underlying rating on the COPs or the rating of Allied Irish Banks, P.L.C. were to be downgraded to 'A-' or lower, the joint probability methodology would no longer be applicable and the long-term rating would then reflect the higher of the two ratings.
The bank is obligated to make payments of principal, interest and purchase price when due. The rating on the COPs will expire upon the earliest of: October 28, 2011, the expiration date of the LOC, unless extended; any prior termination of the LOC; or defeasance of the COPs. The LOC provides full coverage of principal plus an amount equal to 49 days of interest computed at a maximum rate of 12%, based on a year of 365 days, and purchase price for tendered COPs. The Series 2008B COPs are expected to be available for delivery on or about October 28, 2008. The remarketing agent for the COPs is Stone & Youngberg LLC.
The COPs will bear interest in a weekly rate mode, but may be converted to a daily rate, extended rate or fixed rate mode. While COPs bear interest in the weekly rate mode, interest payments are paid on the first business day of each calendar month, commencing December 1, 2008 and holders have the option to tender their COPs on any business day, with the requisite prior notice. The COPs are subject to mandatory tender on (1) conversion of the interest rate mode, (2) on the day next succeeding the last day of each extended rate mode period, and (3) the substitution, expiration or termination of the LOC.
Optional and mandatory redemption provisions also apply to the COPs.
The COPs are being issued to redeem and prepay Elsinore Valley Municipal Water District Variable Rate Certificates of Participation Series 2005.
Fitch issued an exposure draft on July 31, 2008 proposing a recalibration of tax-supported and water/sewer revenue bond ratings which, if adopted, may result in an upward revision of this rating (see Fitch research 'Exposure Draft: Reassessment of the Municipal Ratings Framework'.) At this time, Fitch is deferring its final determination on municipal recalibration. Fitch will continue to monitor market and credit conditions, and plans to revisit the recalibration in the first quarter of 2009.
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|Date:||Oct 16, 2008|
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