$49.41 MILLION IN DEBT AFFECTED.
Sun Devil Energy Center LLC, AZ
NEW YORK, Nov 18, 2010 -- Moody's Investors Service has affirmed the Aa3/VMIG 1 rating assigned to Sun
Devil Energy Center, LLC (Issuer) Variable Rate Demand Revenue Refunding Bonds
(Arizona State University Project) Series 2008 (the Bonds) in conjunction with
the substitution of the current standby bond purchase agreement provided by RBC
Bank (USA) with a standby bond purchase agreement from Royal Bank of Canada (the
The long term rating will continue to be based upon the higher of the underlying
rating on the Bonds or the financial strength rating of the bond insurer,
Assured Guaranty Corp. (AGC). Upon the replacement of the SBPA, scheduled for
November 18, 2010, the short-term rating will reflect the credit quality of the
Bank as the SBPA provider, the structure of the SBPA and the financial strength
rating of AGC as well as the likelihood of the termination of the SBPA without a
mandatory purchase of the bonds. Events that would cause the SBPA to terminate
without a mandatory purchase of the Bonds are directly related to the credit
quality of AGC. In addition, the rating reflects the adequate structure of the
transaction as well as legal protections, which ensure timely payments of
principal, interest and purchase price on the Bonds.
The underlying rating on the Bonds is A1. For more information on the underlying
rating please see report dated June 23, 2010 on moodys.com. Moody' rates AGC Aa3
with a negative outlook. The long-term and short-term deposit ratings of Royal
Bank of Canada are Aaa (on watch for downgrade)/P-1, respectively.
Description of the Bonds
The Bonds will continue to bear interest at a weekly rate and pay interest on
the first business day of each month. The interest rate on the Bonds may be
converted, in whole, to a daily rate, flexible rate, or fixed rate. Upon
conversion of the Bonds to another rate mode, the Bonds will be subject to
mandatory tender at a price of par plus accrued interest. The SBPA only supports
the Bonds while they bear interest in the weekly rate, therefore upon
conversion of all the Bonds to an interest rate mode other than weekly the VMIG
rating will expire.
The trustee will pay principal and interest on the Bonds, whether on an interest
payment date, at maturity or upon mandatory sinking fund redemption, from funds
of the Issuer and to the extent such moneys are insufficient from funds obtained
under the AGC insurance policy. In addition, the policy covers any payments made
to bondholders by the Issuer, which are deemed preferential transfers subject
to recovery under the applicable bankruptcy code. Purchase price payments will
be paid from remarketing proceeds and, to the extent insufficient, from a draw
under the SBPA.
Bondholders may, at their option, tender their Bonds during the weekly rate on
any business day upon seven days prior written notice to the trustee and tender
agent. Bonds, which are purchased by the Bank due to a failed remarketing, may
not be released until the SBPA has been fully reinstated in the amount of the
purchase price drawn for such Bonds.
Substitution of the SBPA is permitted and requires a mandatory tender on the
date of substitution of the liquidity facility. Upon substitution the existing
standby bond purchase agreement will be drawn upon for purchase price and the
trustee shall not surrender the standby bond purchase agreement for cancellation
until any required drawings have been made and honored.
The Bonds are subject to mandatory tender on a date at least 3 business days
preceding the expiration or termination of the SBPA, including termination
following the trustee's receipt of notice of termination from the Bank due to an
event of default under the SBPA. The SBPA will terminate on the 30th day
following the trustee's receipt of such notice of termination.
Insurance Policy and Standby Bond Purchase Agreement
All regularly scheduled payments of principal and interest, whether due on an
interest payment date, at maturity, or upon mandatory sinking fund redemption,
will be secured by the municipal bond insurance policy provided by AGC.
Security for all payments of purchase price upon optional or mandatory tender is
derived from the SBPA provided by the Bank, which is sized for full principal
plus 34 days of interest at a rate of 12%, the maximum rate on the Bonds. The
SBPA will secure payments of purchase price while Bonds bear interest in the
weekly rate to the extent that remarketing proceeds are insufficient.
The trustee is instructed to draw on the SBPA by 1:00 p.m.(New York City time)
on each purchase date to the extent that remarketing proceeds have not been
received. Draws submitted under the SBPA by 1:00 p.m. (New York City time) will
be paid by the Bank by 2:45 p.m. (New York time) on the same business day.
The SBPA will be reinstated for the amount of a draw upon reimbursement to the
The SBPA will expire upon the earliest to occur of: (i) November 18, 2013, the
scheduled expiration date; (ii) the date of receipt by the Bank of notice from
the trustee stating that the interest rate on all the Bonds have been converted
to a rate mode other than the weekly rate and the mandatory purchase has
occurred; (iii) the date of receipt by the Bank of notice from the trustee
stating that a substitute liquidity facility has been provided and become
effective and the mandatory purchase has occurred; (iv) the date which is 30
days following receipt by the trustee of notice of termination from the Bank due
to an event of default under the SBPA; or (v) upon an automatic termination
event under the SBPA.
The Bank's obligation to purchase Bonds under the SBPA may be
immediately terminated or suspended upon the occurrence of the following
events: (i) the bond insurer shall fail to make payment of principal and
interest on any Bond when due as required under the bond insurance policy; (ii)
the bond insurance policy or any material provision of the bond insurance policy
relating to payments of principal and interest on the Bonds (a) ceases to be
valid and binding on the bond insurer; or (b) is declared to be null and void by
a court or other governmental agency with jurisdiction; (iii) the bond insurer
shall: (a) contest in writing the validity or enforceability of the bond
insurance policy or any material provision of the bond insurance policy relating
to payments of principal and interest on the Bonds; or (b) deny that it has any
or further liability or obligation under the bond insurance policy or any
material provision of the bond insurance policy relating to payments of
principal and interest on the Bonds; (iv) the bond insurer or any governmental
authority with jurisdiction over the bond insurer shall declare a moratorium
on payment by the bond insurer of any obligation under a financial
guaranty insurance policy; (v) upon bankruptcy of insolvency of the bond
insurer; (v) a payment default by the bond insurer in respect of any other
bond insurance policy insuring publicly rated debt; (vi) each rating agency then
rating the Bonds shall have withdrawn or suspended the long-term ratings of the
bond insurer or downgraded the such ratings to below investment grade; or (vii)
the bond insurance policy is surrendered , cancelled, suspended, nullified,
terminated, amended, modified, or replaced without the prior written consent of
The Issuer shall not amend or otherwise modify, terminate, surrender, cancel,
suspend, nullify or replace the bond insurance policy or agree or permit the
trustee to amend or otherwise modify, terminate, surrender, cancel,
suspend, nullify or replace the bond insurance policy, in any case, without (A)
the prior written consent of the Bank and (B) written evidence from each rating
agency then providing a rating on the Bonds that the then current long-term
ratings on the Bonds have been confirmed.
What Could Change the Rating-Up
Long-Term: The long-term rating on the Bonds could be upgraded if either the
financial strength rating of the bond insurer was upgraded or the long-term
underlying rating of the Bonds was upgraded above the current financial strength
rating of the bond insurer.
Short-Term: Not applicable.
What Could Change the Rating-Down
Long-Term: The long-term rating on the Bonds could be lowered if the financial
strength rating of the bond insurer was downgraded.
Short-Term: The short-term rating on the Bonds could be lowered if either the
short-term deposit rating on the Bank was downgraded or the financial strength
rating of the bond insurer was downgraded.
Remarketing Agent: RBC Capital Markets
Trustee: The Bank of New York Mellon Trust Company, N.A.
The principal methodologies used in this rating were Moody's Rating
Methodology for Analyzing Insured Floating Rate Bonds published in November
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.
Michael J. Loughlin
Public Finance Group
Moody's Investors Service
Senior Credit Officer
Public Finance Group
Moody's Investors Service
Journalists: (212) 553-0376
Research Clients: (212) 553-1653
MOODY'S AFFIRMS THE Aa3/VMIG 1 RATING ASSIGNED TO SUN DEVIL ENERGY CENTER, LLC VARIABLE RATE DEMAND REVENUE REFUNDING BONDS (ARIZONA STATE UNIVERSITY PROJECT) SERIES 2008
Moody's Investors Service
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