OREANDA-NEWS. S&P Global Ratings today assigned its 'AA-p' rating to Huddlestone Trust Series 2016-1's $20 million trust certificates series 2016-1 due May 20, 2041. The rating reflects our opinion of the likelihood that the trust will have sufficient assets to pay timely principal when due on the certificates. These assets include the underlying securities, which comprise either The Energy Select Sector SPDR Fund of The Select Sector SPDR trust (XLE shares) or U. S. Treasury separate trading of registered interest and principal securities (STRIPS) ('AA+'). XLE shares will be exchanged with STRIPS provided by Wells Fargo Bank N. A. (AA-/Stable/A-1+) upon a conversion event, described in the exchange agreement, which Wells Fargo Bank N. A. entered into with the trust.

Our principal-only rating (signified by the rating's 'p' suffix) on the certificates depends on the lower of our rating on the creditworthiness of the STRIPS and our long-term issuer credit rating on the exchange agreement counterparty, Wells Fargo Bank N. A. Our view of the STRIPS' creditworthiness is commensurate with our long-term credit rating on the United States of America. Our principal-only rating does not reflect our opinion of the likelihood of the certificateholder's receipt of any certificate interest from XLE shares dividend distributions.

On the closing date (April 28, 2016), the trust acquired the XLE shares with a $20 million face value. Concurrently, the trust entered into an exchange agreement with Wells Fargo Bank N. A. that consists of two main components: (1) Wells Fargo's obligation to provide the STRIPS to the trust in exchange for XLE shares upon a conversion event and (2) its agreement to pay unfunded extraordinary trust expenses, if any, upon the trust's early termination and, under certain early termination scenarios, to deliver the U. S. Treasury STRIPS to the certificateholder for a final payment in kind.

In our view, the certificateholder may receive less than the par amount due on the certificates if:The U. S. fails to pay the STRIPS when due;Wells Fargo fails to deliver the STRIPS under the exchange agreement; orWells Fargo defaults on any payment due under the exchange agreement or fails to pay the trust's unfunded extraordinary expenses. In view of the series 2016-1 structure, changes to our rating on the certificates may result from, among other things, changes to our ratings on the U. S. or Wells Fargo Bank N. A.

The principal amount that is due on the certificates is payable on May 20, 2041. However, the certificates may be retired sooner if a conversion event occurs, the underlying security defaults, or the exchange agreement is terminated early.

In rating this transaction, we reviewed the relevant legal matters and opinions outlined in our criteria.