$55,500,000 OF DEBT AFFECTED. JOINT DEFAULT RATING SUPPORTED BY SOUTHWEST MEDICAL CENTER AND A LETTER OF CREDIT PROVIDED BY UNION BANK, N.A.
Washington Health Care Facilities Auth
Fully Supported
WA
Opinion
NEW YORK, Jan 14, 2011 -- Correction to Analyst listed. Josephine Castro replaces Randy Matlosz who was
previously incorrectly listed.
Moody's Investors Service has confirmed the Aa3 long term letter of
credit backed rating of the Washington Health Care Facilities Authority
Variable Rate Revenue Bonds, Series 2008A (Southwest Medical Center) (the Bonds)
in conjunction with the substitution of the current letter of credit provided by
Allied Irish Banks, p.l.c. with a new letter of credit provided by Union Bank,
N.A. (the Bank). The short term rating has been upgraded to VMIG 1 from VMIG 3.
The substitution is scheduled for December 28, 2010.
RATINGS RATIONALE
The long-term rating is based on a joint default analysis (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 the provider of the substitute
letter of credit; the underlying rating of the Bonds; and the structure and
legal protections of the transaction, which ensures timely debt service payments
to investors. The timely payment of purchase price is reflected in the
short-term rating of the Bonds. The short-term rating of the Bonds is based upon
the short-term rating of the Bank as provider of the letter of credit. The Bank
is currently rated A2 for long-term obligations and Prime-1 for short-term
obligations. Moody's currently maintains an underlying rating of A2 on Southwest
Washington Medical Center (the Borrower). Please see the rating update
report dated July 2, 2008 for more information on the underlying rating of the
Bonds.
Since a loss to investors would occur only if both the Bank and Borrower default
in payment, Moody's has assigned the long-term portion of the rating based upon
the joint probability of default by both parties. In determining the joint
probability of default, Moody's considers the level of default dependence
between the Bank and the Borrower. Moody's has determined that there is a low
level of default dependence between the Bank and the Borrower. As a result,
based on Moody's JDA methodology the joint probability of default for the Bank
and the Borrower, results in a JDA rating of Aa3.
Interest Rate Modes and Payment
The Bonds will continue to bear interest at the weekly rate mode. Interest is
paid on the first business day of each month. The Bonds may be converted, in
whole, to bear interest at the daily, commercial paper or term rate modes and
are subject to mandatory tender on any conversion date at a price of par plus
accrued interest. Moody's JDA and short term ratings apply to the Bonds only
while they bear interest at the weekly or daily rate modes. While in the
daily rate mode, interest shall also be paid on the first business day of each
month.
Flow of Funds
The trustee is instructed to draw on the letter of credit for principal or
interest in order to receive funds by 3:00 p.m., Eastern Time on the business
day such payments are due. The trustee is also instructed to draw on the letter
of credit by 12:30 a.m., Eastern Time, on each purchase date in accordance with
its terms, to the extent remarketing proceeds are insufficient, in order
to receive payment of purchase price by 2:30 p.m., Eastern Time, on such date.
Bonds which are purchased by the Bank due to a failed remarketing are held by
the Bank and will not be released until the tender agent has received written
confirmation from the Bank that the letter of credit has been reinstated in
full.
In the event that the Bank wrongfully fails to honor any draw under the letter
of credit, the trustee is instructed to use Borrower funds on deposit in order
to make full and timely payments of amounts due.
The Direct Pay Letter of Credit
The letter of credit is sized for full principal, plus 47 days of interest at
the rate of 12%, the maximum rate applicable to the Bonds. The letter of credit
will provide sufficient coverage for the Bonds while they bear interest at the
weekly or daily rate modes.
Draws on the Letter of Credit
Conforming draws for principal, interest and or purchase price presented to the
Bank at or before 9:30 a.m., Pacific Time, on a business day, will be honored by
the Bank on or before 11:30 a.m., Pacific Time, on the same business day.
Substitution
Bonds are subject to mandatory tender on the effective date of an
alternate letter. The existing letter of credit may not be surrendered
until after the Trustee has drawn on and received payment from the
existing letter of credit for such mandatory tender.
Reinstatement of Interest Draws
The interest component of the letter of credit will be automatically
reinstated effective the 6th business day following the payment of such draw
unless notice of non-reinstatement with direction to accelerate the maturity of
the Bonds is received by the trustee by the 5th business day following such
payment. Upon receipt of such notice the trustee will affect a mandatory tender
of the Bonds on the 2nd business day following receipt of such notice.
Reimbursement Agreement Events of Default
The Bank may at any time, send written notice to the trustee stating that an
event of default under the reimbursement agreement has occurred and directing
the trustee to effect a mandatory tender of the Bonds on the 2nd business day
following the trustee's receipt of such notice.
The Bank may also exercise the right to accelerate the maturity of the Bonds, as
provided in the Indenture. Upon receipt of such notice directing acceleration,
the trustee will immediately declare the interest and principal on the Bonds to
be due and payable. Interest will cease to accrue at the declaration of such
acceleration.
Trust Indenture Events of Default Related to Payment
Upon a failure to pay when due the principal, interest or purchase price on the
Bonds the trustee may, with the written consent of the Bank, and shall at the
written direction of the Bank, accelerate the maturity of the Bonds and
immediately declare the principal and interest due and payable. Interest will
cease to accrue at the declaration of such acceleration.
Expiration/Termination of the Letters of Credit
The letter of letter of credit shall expire upon the earliest of the
following to occur: (1) the Banks' receipt of the trustee's certification that
no Bonds remain outstanding; (2) the date on which the Bank honors a final
drawing; or (3) December 27, 2013, the stated expiration date of the letter of
credit.
Optional Tenders
During the weekly rate mode, bondholders may optionally tender their Bonds on
any business day by delivering notice to the tender agent at least seven days
prior to the purchase date. During the daily rate mode, bondholders may
optionally tender their Bonds on any business day by delivering notice to the
tender agent by 11:00 a.m., Eastern Time.
Mandatory Purchases
The Bonds are subject to mandatory tender on the following dates: (1) on the
date of the conversion of interest rate; (2) on the 5th business day prior to
the expiration of the letter of credit; (3) on the 2nd business date following
the trustee's receipt of direction from the bank to effect a mandatory tender as
a result of the non-reinstatement of the interest portion of the letter of
credit and/or an event of default under the reimbursement agreement ; or (4)
date the letter of credit is substituted.
Mandatory Redemptions
The Bonds are subject to mandatory sinking fund redemptions on September 1st of
each year.
What Could Change the Ratings-UP
Long-Term: the long-term rating of the Bonds could be upgraded if the long -term
deposit rating of the Bank or the long-term underlying rating of the Bonds were
upgraded.
Short-Term: Not applicable.
What Could Change the Ratings-DOWN
Long-Term: the long-term rating of the Bonds could be lowered if the long term
deposit rating of the Bank or the long-term underlying rating of the Bonds were
downgraded, or if there is an increase in the level of default dependence
between the Bank and the Borrower.
Short-Term: the short-term rating of the Bonds could be lowered if the
short-term deposit rating on the Bank was downgraded.
Key Contacts
Underwriter & Remarketing Agent: Morgan Stanley & Co.
Trustee: U.S. Bank National Association
The principal methodologies used in this rating were Moody's Rating Methodology
for Letter of Credit Supported Transactions published in August 2005, and
Applying Global Joint Default Analysis to Letter of Credit Backed Transactions
in the U.S. Public Finance Sector published in October 2010.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following: parties
involved in the ratings and public information.
Moody's Investors Service considers the quality of information available on the
issuer or obligation satisfactory for the purposes of maintaining a credit
rating.
Moody's adopts all necessary measures so that the information it uses in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service 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 the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.
Analysts
Josephine Castro
Analyst
Public Finance Group
Moody's Investors Service
David A. Parsons
Senior Credit Officer
Public Finance Group
Moody's Investors Service
Contacts
Journalists: (212) 553-0376
Research Clients: (212) 553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA
CORRECTION TO TEXT OF DECEMBER 28, 2010 RELEASE : MOODY'S CONFIRMS Aa3 LONG TERM LETTER OF CREDIT BACKED RATING OF THE WA HEALTH CARE FACILITIES AUTHORITY VAR RATE REV BONDS, SERIES 2008A (SOUTHWEST MEDICAL CENTER). SHORT TERM RATING VMIG 1 FROM VMIG 3.
