Fitch Revises L-T and Assigns S-T Rtg to TBTA (NY) Gen Rev VR Rfdg Bonds Subseries 2005B-4c.
The Rating Outlook is Stable for the long-term rating.
The rating action is in connection with (1) the mandatory tender of the subseries 2005B-4c and 2005B-4d bonds and the subsequent consolidation of the subseries 2005B-4c bonds and the 2005B-4d bonds into one subseries designated as subseries 2005B-4c; (2) the addition of an irrevocable direct-pay letter of credit (LOC) issued by U.S. Bank, N.A. (U.S. Bank, rated AA-/F1+/Stable), which provides support for the subseries 2005B-4c bonds; (3) the remarketing of the subseries 2005B-4c bonds as VRDBs in the daily rate mode; and (4) the amendment and restatement of the Certificate of Determination for the bonds.
KEY RATING DRIVERS
The long-term 'AA+' rating is based jointly on the underlying rating assigned to those bonds by Fitch (currently rated AA-/Stable), and the rating assigned by Fitch to U.S. Bank, N.A. (rated AA-/F1+/Stable), which provides the irrevocable direct-pay LOC, which supports the series 2005B-4c bonds. The short-term 'F1+' rating is based solely on the LOC. For information about the underlying credit rating see Fitch rating action commentary dated Jan. 18, 2018 at 'www.fitchratings.com'.
Fitch's dual-party pay criteria consider the likelihood of the failure of both a rated obligor and a bank LOC provider. The methodology results in a long-term 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 bonds defaulted; and (3) the interest rate modes to be covered by Fitch's rating provide for either a mandatory purchase at the end of each interest rate period, or a purchase demand option. A one or two notch uplift will apply to the long-term rating depending on the frequency of the purchase demand option or the duration of the interest rate period which concludes with a mandatory tender.
The bonds provide holders with a same day tender option while the bonds are in the daily rate mode and an option to tender bonds upon seven day notice while the bonds bear interest in the weekly interest rate mode; both daily and weekly modes are rated by Fitch. Fitch will apply a two notch uplift, which results in a long-term rating of 'AA+' for the bonds.
U.S. Bank, N.A. is obligated to make regularly scheduled payments of principal of and interest on the bonds in addition to payments upon maturity, and redemption, as well as purchase price for tendered bonds. The LOC has a stated expiration date of May 26, 2022, unless extended or earlier terminated, and provides full and sufficient coverage of principal plus an amount equal to 53 days of interest at a maximum rate of 9% based on a year of 365 days and purchase price for tendered bonds, while in the daily and weekly rate modes. US Bancorp will be the remarketing agent for the bonds.
The subseries 2005B-4c bonds initially bear interest at a daily rate but may be converted to a weekly, commercial paper, term or fixed interest rate. Interest payments while the bonds are in the daily or weekly rate mode are on the first business day of each month, commencing Dec. 3, 2018. The trustee is obligated to make timely draws on the LOC to pay principal, interest, and purchase price. Funds drawn under the LOC are held uninvested, and are free from any lien prior to that of the bondholders.
Holders may tender their bonds on any business day, provided the tender agent is given the requisite prior notice of the purchase. The bonds are subject to mandatory tender: (1) upon conversion of the interest rate; (2) upon expiration, substitution or termination of the LOC; (3) following receipt of written notice from the bank of an event of default under the Letter of Credit and Reimbursement Agreement, and (4) following receipt of notice from the bank that the interest component will not be reinstated directing such mandatory tender. Optional and mandatory redemption provisions also apply to the bonds. There are no provisions for the issuance of additional bonds.
The long-term rating is tied to the long-term rating assigned to the bonds and the long-term rating that Fitch maintains on the bank providing the LOC. Changes to one or both of these ratings may affect the long-term rating assigned to the bonds. Additionally, if either the underlying bond rating or the bank rating were downgraded to 'A-' or lower, the dual-party pay criteria could no longer be applied, and the long-term rating assigned to the bonds would then be adjusted to the higher of the bank rating and the underlying bond rating.
The short-term ratings are exclusively tied to the short-term ratings that Fitch maintains on the bank providing the LOC and will reflect all changes to those ratings.
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|Publication:||Daily the Pak Banker (Lahore, Pakistan)|
|Date:||Mar 18, 2019|
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