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Rating Update:

MOODY'S AFFIRMS THE Aa1/VMIG 1 LETTER OF CREDIT-BACKED RATING OF THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD OF THE COUNTY OF KNOX, ADJUSTABLE RATE HOSPITAL FACILITIES REVENUE BONDS (CATHOLIC HEALTHCARE PARTNERS PROJECT) SERIES 2008A&B

01 Mar 2011

$75 MILLION OF DEBT AFFECTED. SUBSTITUTE LETTERS OF CREDIT PROVIDED BY U.S. BANK NATIONAL ASSOCIATION.

Knox (County of) TN, Hlth & Educ Fac Board
Fully Supported
TN

Opinion

NEW YORK, Mar 1, 2011 -- Moody's Investors Service has affirmed the Aa1/VMIG 1 rating of The Health, Educational and Housing Facility Board of the County of Knox, Adjustable Rate Hospital Facilities Revenue Bonds (Catholic Healthcare Partners Project) Series 2008A&B (the Bonds) in conjunction with the substitution of the current letters of credit provided by Landesbank Baden-Wuerttemberg with irrevocable direct-pay letters of credit (LOCs) to be provided by U.S. Bank National Association (Bank). The effective date of the LOCs is March 1, 2011.

Rating Rationale

Upon the effective date of the substitute LOCs the long-term rating will be based on a joint default analysis (JDA) which reflects Moody's approach to rating jointly supported transactions. The JDA rating will be based upon the long-term rating of U.S. Bank National Association (the Bank) as provider of the letters of credit; the underlying rating assigned to 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 is based on the short term rating of the Bank. U.S. Bank National Association is currently rated Aa2 for long-term other senior obligations (OSO) and Prime-1 for short-term OSO.

Moody's currently maintains an underlying rating of A1 on the Bonds.

Detailed Credit Discussion

Moody's has affirmed the rating based upon the joint probability of default by both the Bank providing the letters of credit and Catholic Healthcare Partners (the Borrower). A loss to investors would occur only if both the Bank and the Borrower default in payment. 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, the joint probability of default for the Bank and the Borrower results in a credit risk consistent with a JDA rating of Aa1.

Interest Rate Modes and Payment

The Bonds will continue to bear interest in a weekly rate mode and interest will be paid on the first Wednesday of each month. The trust indenture permits conversion of the Bonds, in whole, to a daily, SIFMA term floater period, LIBOR-based, auction, commercial paper, long-term, or fixed rate mode and upon any conversion the Bonds will be subject to mandatory purchase. Moody's JDA and short-term ratings apply only to Bonds bearing interest in the weekly or daily rate modes. Bonds bearing interest in the daily rate mode pay interest on the first business day of each month.

Additional Bonds

No additional Bonds may be issued pursuant to the Trust Indenture.

Flow of Funds

The trustee is instructed to draw on the applicable letter of credit in accordance with its terms and in an amount sufficient to pay principal and interest on the Bonds on such payment date. In the event the Bank fails to deposit such moneys by the time required, the trustee shall utilize funds of the Borrower to make such payments to bondholders. The trustee is also instructed to draw on the applicable letter of credit by 12:00 p.m., (New York Time), on each purchase date to the extent remarketing proceeds are insufficient. Bonds which are purchased by the Bank due to a failed remarketing are held by the trustee and will not be released until the trustee has received confirmation from the Bank stating that the applicable LOC has been reinstated in the amount of the purchase price drawn for such Bonds.

Letters of Credit

The LOCs are each sized for full principal plus fifty (50) days of interest at the maximum rate (12%) applicable to the Bonds and will provide coverage for the Bonds while they bear interest in the weekly and daily rate modes only. The total principal amount outstanding of the 2008A series is $30,000,000. The total principal amount outstanding of the 2008B series is $45,000,000.

Draws on the Letters of Credit

Conforming draws for principal or interest presented to the Bank at or before 3:00 p.m. (New York Time), on a business day, will be honored by the Bank by 12:00 p.m. (New York Time) on the next business day. Conforming draws for purchase price presented to the Bank at or before 12:00 p.m. (New York Time), on a business day, will be honored by the Bank no later than 2:00 p.m. (New York time), on the same business day.

Substitution of the Letters of Credit

The applicable series of Bonds are subject to mandatory tender five (5) calendar days prior to each letter of credit substitution date.

Reinstatement of Interest Draws

Draws made under the LOCs for interest shall be automatically reinstated on the opening of business on the sixth (6th) calendar day following such interest drawing unless by 3:00 p.m. (New York Time) on the fifth (5th) calendar day following such drawing, the trustee receives notice from the Bank that an event of default under the reimbursement agreement has occurred with direction to accelerate or cause a mandatory tender of the Bonds. Upon receipt of such non-reinstatement notice with direction to accelerate the Bonds, the trustee shall declare the Bonds immediately due and payable and interest shall accrue to the payment date, which date shall be within four (4) calendar days of the date of the trustee's declaration of acceleration. Upon receipt of such non-reinstatement notice with direction to cause a mandatory tender of the Bonds, the trustee shall cause a mandatory tender within four (4) calendardays of the date of receipt of such notice.

Reimbursement Agreement Defaults

The Bank may send notice to the trustee that an event of default under the reimbursement agreement has occurred with direction to accelerate or cause a mandatory tender of the applicable series of Bonds. Upon receipt of such default notice with direction to accelerate the Bonds, the trustee shall declare the applicable series of Bonds immediately due and payable and interest shall accrue to the payment date, which date shall be within four (4) calendar days of the date of the trustee's declaration of acceleration. Upon receipt of such default notice with direction to cause a mandatory tender of the Bonds, the trustee shall cause a mandatory tender of the applicable series of Bonds within four (4) calendar days of receipt of such notice. The applicable letter of credit terminates ten (10) calendar days following the trustee's receipt of notice of an event of default under the reimbursement agreement with direction to accelerate or cause a mandatory tender of the Bonds.

Expiration / Termination of the Letters of Credit

Each letter of credit shall terminate upon the earliest to occur of: (i) the scheduled expiration date, March 1, 2014; (ii) the date on which the Bank receives notice from the trustee that five (5) calendar days have passed since (a) all of the outstanding Bonds were converted to bear interest in a SIFMA term floater period, LIBOR-based, auction, commercial paper, long-term, or fixed rate mode, (b) a substitute letter of credit has been issued to replace the existing letter of credit, or (c) the Borrower has determined not to provide credit enhancement an in connection therewith the applicable series of Bonds were subject to mandatory tender pursuant to the trust indenture; (iii) the tenth (10th) calendar day following the date of receipt by the trustee of notice from the Bank that an event of default under the reimbursement agreement has occurred with direction to cause a mandatory tender or an acceleration of the applicable series of Bonds; (iv) the date on which the Bank honors a final drawing under the letter of credit; and (v) the date on which the letter of credit is surrendered to the Bank for cancellation .

Optional Tenders

Bondholders may optionally tender their Bonds during the daily rate mode on any business day by delivering notice to the trustee and remarketing agent by 11:00 a.m. (New York time). Bondholders may optionally tender their Bonds during the weekly rate mode on any business day with seven days prior written notice to the trustee and remarketing agent.

Mandatory Purchases

The applicable series of Bonds are subject to mandatory tender on the following dates: (i) on the day following the last day of any commercial paper period; (ii) on any interest rate conversion date; (iii) five (5) calendar days prior to the expiration of the applicable letter of credit; (iv) five (5) calendar days prior to the substitution of the applicable letter of credit; and (v) on a business day not later than four (4) days following the trustee's receipt of notice that an event of default under the reimbursement agreement has occurred with direction to cause a mandatory tender of the Bonds.

Mandatory Redemptions

The Bonds are subject to the following mandatory redemptions: (i) following a destruction of the property; and (ii) mandatory sinking fund redemptions.

What Could Make The Rating Go Up

Long-Term: The long-term rating on the Bonds could be raised if the long-term OSO rating on the Bank was upgraded or the long-term underlying rating was upgraded.

Short-Term: Not applicable

What Could Make The Rating Go Down

Long-Term: The long-term rating on the Bonds could be lowered if the long-term OSO rating on the Bank or the long-term underlying rating was downgraded or if the default dependence increased.

Short-Term: The short-term rating on the Bonds could be lowered if the short-term OSO rating on the Bank was downgraded.

Contacts

Trustee: Bank of New York Mellon

Remarketing Agent: Morgan Keegan & Company, Inc. for Series 2008A; JPMorgan Securities, Inc. for Series 2008B

Methodology

The principal methodology used in this rating was Moody's Rating Methodology for Letter of Credit Supported Transactions published in August 2005.

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

Coby Kutcher
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

MOODY'S AFFIRMS THE Aa1/VMIG 1 LETTER OF CREDIT-BACKED RATING OF THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD OF THE COUNTY OF KNOX, ADJUSTABLE RATE HOSPITAL FACILITIES REVENUE BONDS (CATHOLIC HEALTHCARE PARTNERS PROJECT) SERIES 2008A&B
No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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