Fitch to Revise L-T Rating & Assign S-T Rating on TBTA (NY) Gen Revs VR Rfdg Bds 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 on Nov. 28, 2018 and the subsequent consolidation of the subseries 2005B-4c bonds and the 2005B-4d bonds into one subseries to be designated as subseries 2005B-4c. (2) the addition of an irrevocable direct-pay letter of credit (LOC) on Nov.28, 2018 to be issued by U.S. Bank, N.A. (U.S. Bank, rated AA-/F1+/Stable) which will provide support for the subseries 2005B-4c bonds; (3) the remarketing of the subseries 2005B-4c bonds as VRDBs in the daily rate mode;(4) the amendment and restatement of the Certificate of Determination for the bonds.
KEY RATING DRIVERS
The long-term 'AA+' rating will be determined using Fitch's dual-party pay criteria and will be based jointly on the underlying rating assigned to those bonds by Fitch (currently AA-/Stable), and the rating assigned by Fitch to U.S. Bank, (rated AA-/F1+/Stable), which will, on the effective date, provide the LOC as support for the subseries 2005B-4c bonds. The short-term 'F1+' rating will be based solely on the U.S. Bank LOC. For information about the underlying credit rating see the press release 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 purchase.
The bonds provide holders with a tender option with same day notice during the daily interest rate mode and with seven days' notice during the weekly interest rate period. Both modes are covered by the U.S. Bank LOC and Fitch will apply a two-notch uplift, which results in a long-term rating of 'AA+' for the bonds.
Pursuant to the LOC, the bank is obligated to make regularly scheduled payments of principal of and interest on the bonds in addition to payments due upon maturity and redemption, as well as purchase price for tendered bonds. The LOC to be provided by U.S. Bank has a stated expiration date of May 26, 2022, unless such date is 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 mode. USBancorp Investments, Inc. and U.S. Bank Municipal Products Group, a division of U.S. Bank, National Association are the remarketing agents for the 2005B-4c bonds which will be remarketed in the daily interest rate mode.
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. 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 rating is exclusively tied to the short-term rating that Fitch maintains on the bank providing the substitute LOC and will reflect all changes to that rating.
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|Publication:||Daily the Pak Banker (Lahore, Pakistan)|
|Date:||Jan 22, 2019|
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