Fitch Assigns Ratings to NYC Muni Water Fin Auth's $289MM Series 2017BB
--$100,000,000 subseries BB-1A (BB-1A bonds) 'AA+/F1+';
--$100,000,000 subseries BB-1B (BB-1B bonds) 'AA+/F1+';
--$50,000,000 subseries BB-2 (BB-2 bonds) 'AA+/F1+';
--$39,500,000 subseries BB-3 (BB-3 bonds) 'AA+/F1'.
KEY RATING DRIVERS:
NYW long-term 'AA+' rating continues to reflect its legal framework, including its bankruptcy remote status, exceptionally large, diverse and economically important service area, its independent rate-setting authority, strong financial and capital program management, sound financial metrics, and high debt levels. For more information on Fitch's long-term rating on NYW, see the press release 'Fitch Rates New York City Muni Water Finance Authority's $200MM Revs 'AA+'; Outlook Stable' dated Sept. 16, 2016, available at 'www. fitchratings. com'.
The short-term 'F1+' ratings assigned to the BB-1A and BB1-B bonds are based on the liquidity support provided by State Street Bank and Trust Company (State Street), rated 'AA/F1+', Stable Outlook, in the form of two separate Standby Bond Purchase Agreements (SBPAs), which have a stated expiration date of Oct. 5, 2021, unless extended or earlier terminated, during the daily, weekly and two-day interest rate modes only. The short-term 'F1+' rating assigned to the BB-2 bonds is based on the liquidity support provided by Bank of Montreal (BMO), rated 'AA-/F1+', Stable Outlook, acting through its Chicago branch, in the form of a SBPA, which has a stated expiration date of Oct. 5, 2020, unless extended or earlier terminated, during the daily, weekly and two-day interest rate modes only. The 'F1' rating assigned to the BB-3 bonds is based on the liquidity support provided by Sumitomo Mitsui Banking Corporation (SMBC), rated 'A/F1', Negative Outlook, acting through its New York branch, in the form of a Revocable Standby Letter of Credit (SLOC), which has a stated expiration date of Oct. 5, 2021, during the weekly mode only.
The substitute SBPAs provide for the payment of the principal component of purchase price plus an amount equal to 35 days of interest calculated at a maximum rate of 9%, based on a year of 365 days for tendered bonds during the daily, weekly and two-day rate modes in the event that the proceeds of a remarketing of the bonds are insufficient to pay the purchase price following an optional or mandatory tender. The SMBC SLOC provides for the payment of the principal component of purchase price plus an amount equal to 35 days of interest calculated at a maximum rate of 9%, based on a year of 365 days only during the weekly rate mode. The State Street SBPAs and the SMBC SLOC will expire on Oct. 5, 2021, the stated expiration date, unless such date is extended; upon conversion to a mode not covered by the related SBPA or SLOC; or upon the occurrence of certain events of default which result in a mandatory tender or other events of default related to the credit of the bonds which result in an automatic and immediate termination. The BMO SBPA will expire on Oct. 5, 2020, the stated expiration date, unless such date is extended; upon conversion to a mode not covered by the SBPA; or upon the occurrence of certain events of default which result in a mandatory tender or other events of default related to the credit of the bonds which result in an automatic and immediate termination. The remarketing agent for the BB-1A and BB-1B bonds is Jeffries LLC. The remarketing agent for the BB-2 and BB-3 bonds is Citigroup Global Markets Inc. The bonds are expected to be delivered on or about Oct. 6, 2016.
The BB-1A, BB-1B and BB-2 bonds will be issued in the daily rate mode, but may be converted to a weekly, commercial paper, flexible, two-day, auction or fixed rate. The BB-3 bonds will be issued in the weekly rate mode, but may be converted to a daily, commercial paper, flexible, two-day, auction or fixed rate. While bonds bear interest in the daily, weekly and two-day rate modes, interest is paid on the 15th day of each month, commencing Oct. 17, 2016. Holders of bonds bearing interest in the daily, weekly or two-day rate mode may tender their bonds for purchase with the requisite prior notice. The tender agent is obligated to make timely draws on the related SBPA or SLOC to pay purchase price in the event of insufficient remarketing proceeds, and in connection with the expiration or termination of the SBPA, except in the case of the credit-related events permitting immediate termination or suspension of the SBPA.
Funds drawn under the SBPA are held uninvested, and are free from any lien prior to that of the bondholders. The bonds are subject to mandatory tender: (1) upon conversion of the interest rate, except when converting among daily, weekly and two-day modes; (2) upon expiration, substitution or termination of the SBPA; and (3) following the receipt of written notice from the bank of an event of default under the SBPA, directing such mandatory tender. Optional and mandatory redemption provisions also apply to the bonds.
Bond proceeds will be used to finance capital improvements and to retire outstanding commercial paper.
RATING SENSITIVITIES
The short-term rating reflects the short-term rating that Fitch maintains on the bank providing liquidity support and will be adjusted upward or downward in conjunction with the short-term rating of the bank and, in some cases, the long-term rating of the bonds. The long-term rating is exclusively tied to the creditworthiness of the bonds and will reflect all changes to that rating.
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