$188.71 million of total debt affected. Long-term rating based on joint support from Barclays Bank PLC as provider of the letter of credit and the Commonwealth of Puerto Rico.
Fully Supported
PR
Opinion
NEW YORK, Dec 17, 2012 -- Opinion
Moody's Investors Service has affirmed the Aa3 long-term letter of credit backed
rating of the Commonwealth of Puerto Rico Public Improvement Refunding Bonds
Series 2003 C-5-2 (the Bonds).
SUMMARY RATING RATIONALE
Moody's reviewed the long-term rating of the Bonds following Moody's downgrade
of their underlying rating to Baa3 from Baa1 on December 13, 2012. For more
information on the underlying rating of the Commonwealth of Puerto Rico, see the
rating update report dated December 13, 2012. The Bonds are supported by a
letter of credit provided by Barclays Bank PLC (the Bank). The long-term rating
of the Bonds continues to be based on joint default analyses (JDA) which
reflects Moody's approach to rating jointly supported transactions. The JDA
rating is based upon the long-term rating of the Bank as provider of the letter
of credit, the rating of the Commonwealth of Puerto Rico (the Commonwealth)and
the structure and legal protections of the transactions which provide for timely
debt service payments to investors.
The short-term rating of the Bonds, which reflects the timely payment of
purchase price, remains VMIG 1. The short-term rating of the Bonds is based
solely upon the short-term rating of the Bank as provider of the letter of
credit. The Bank's long-term issuer rating is A2 and its short-term
issuer rating is P-1.
DETAILED CREDIT DISCUSSION
Since a loss to investors would occur only if both the Bank and Puerto Rico
default in payment, Moody's has assigned the long-term rating based on the joint
probability of default by both the Bank and Puerto Rico. In determining joint
probability of default for letter of credit backed obligations in the municipal
sector Moody's considers the level of default dependence between the letter of
credit provider and the obligor. In this case, Moody's has determined that there
is a low level of default dependence between the Bank and the Commonwealth of
Puerto Rico. Low default dependence and the long-term ratings of the Bank and
the Commonwealth result in credit risk consistent with a JDA rating of Aa3 for
the Bonds.
WHAT COULD CHANGE THE RATING-UP
The long-term JDA rating of the Bonds could be upgraded if Moody's were to
upgrade either the long term issuer rating of the Bank or the long-term
underlying rating of the Bonds.
WHAT COULD CHANGE THE RATING-DOWN
The long-term JDA rating of the Bonds could be lowered if Moody's were to
downgrade the long term issuer rating of the Bank or the long-term underlying
ratings of the Bonds, or if the level of default dependence between the Bank and
the Commonwealth of Puerto Rico were to increase.
PRINCIPAL METHODOLOGY USED
The principal methodologies used in these ratings were Applying Global Joint
Default Analysis to Letter of Credit Backed Transactions in the U.S. Public
Finance Sector published in October 2010 and Moody's Methodology for Rating U.S.
Public Finance Transactions Based on the Credit Substitution Approach published
in August 2009.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued by one of
Moody's affiliates outside the EU are endorsed by Moody's Investors Service
Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with
Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating
Agencies. Further information on the EU endorsement status and on the
Moody's office that has issued a particular Credit Rating is available on
www.moodys.com.
For ratings issued on a program, series or category/class of debt, this
announcement provides relevant regulatory disclosures in relation to each rating
of a subsequently issued bond or note of the same series or category/class of
debt or pursuant to a program for which the ratings are derived exclusively from
existing ratings in accordance with Moody's rating practices. For ratings issued
on a support provider, this announcement provides relevant regulatory
disclosures in relation to the rating action on the support provider and in
relation to each particular rating action for securities that derive their
credit ratings from the support provider's credit rating. For provisional
ratings, this announcement provides relevant regulatory disclosures in
relation to the provisional rating assigned, and in relation to a
definitive rating that may be assigned subsequent to the final issuance of the
debt, in each case where the transaction structure and terms have not
changed prior to the assignment of the definitive rating in a manner that
would have affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
Moody's considers the quality of information available on the rated entity,
obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses in
assigning a rating is of sufficient quality and from sources Moody's considers
to be reliable including, when appropriate, independent third-party sources.
However, Moody's is not an auditor and cannot in every instance independently
verify or validate information received in the rating process.
Please see Moody's Rating Symbols and Definitions on the Rating Process page on
www.moodys.com for further information on the meaning of each rating category
and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com for the last
rating action and the rating history. The date on which some ratings were first
released goes back to a time before Moody's ratings were fully digitized and
accurate data may not be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information that is
available to it. Please see the ratings disclosure page on our website
www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to the lead rating analyst
and to the Moody's legal entity that has issued the rating.
Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of
interests.
Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%)
and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated
entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an
ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of
the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this
matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information
on the meaning of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating
history.
The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and
accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and
accurate based on the information that is available to it. Please see the ratings disclosure page on our website
www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that
has issued the rating.
Analysts
Emily Korot
Analyst
Public Finance Group
Moody's Investors Service
Thomas Jacobs
Senior Credit Officer
Public Finance Group
Moody's Investors Service
Contacts
Journalists: (212) 553-0376
Research Clients: (212) 553-1653
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
USA
MOODY'S AFFIRMS Aa3 LONG-TERM LETTER OF CREDIT-BACKED RATING OF THE COMMONWEALTH OF PUERTO RICO PUBLIC IMPROVEMENT REFUNDING BONDS SERIES 2003 C-5-2
