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Rating Update:

MOODY'S AFFIRMS THE Aaa/VMIG 1 RATING FOR LUBBOCK INDEPENDENT SCHOOL DISTRICT (TX).

17 Feb 2011

Primary & Secondary Education
TX

Opinion

NEW YORK, Feb 17, 2011 -- Moody's Investors Service affirms Aaa/VMIG 1 for Lubbock Independent School District Variable Rate Unlimited Tax School Building Bonds, Series 2005-A and Series 2006 (collectively the Bonds) in conjunction with the amendment and restatement of the current standby bond purchase agreements provided by Bank of America, N.A. currently scheduled to become effective on February 16, 2011. Lubbock ISD's general obligation debt holds a Aa1 underlying rating. For more information on the long-term creditworthiness of the district, please see Moody's New Issue Report published on January 31, 2011.

RATING RATIONALE

The short-term rating of VMIG 1 on the Bonds is derived from the credit quality of, Bank of America, N.A. (the Bank), as provider of the liquidity facility for each Series in the form of a standby bond purchase agreement (SBPA or liquidity facility) and the likelihood of termination of the SBPA without a mandatory tender. The long-term and short-term other senior obligation (OSO) rating of Bank of America, N.A. is Aa3 and P-1, respectively.

DETAILED CREDIT DISCUSSION

Events that would cause the liquidity facility to terminate without a mandatory purchase of the Bonds are directly related to the credit quality of the Permanent School Fund (PSF). Accordingly, the likelihood of any such events occurring is reflected in the long-term rating assigned to each series of Bonds.

The Bank may automatically terminate its payment obligation under each liquidity facility upon any of the following, if at any time: (i) the PSF shall fail to pay any amount of principal of or interest on any Bond when the same shall become due and payable pursuant to the PSF guarantee; (ii) the PSF guarantee or any material provision relating to payment of principal and interest on the Bonds thereof at any time after its execution and delivery shall cease to be valid and binding on the PSF or in full force and effect or shall be declared to be null and void by any court, legislative body, governmental agency or other authority having jurisdiction over the PSF, or any pledge or security interest created by the PSF guarantee shall fail to be fully enforceable with the priority required under the PSF guarantee and the order, or the validity or enforceability of the PSF guarantee shall be (A) contested by the PSF or (B) declared invalid, unenforceable or null and void by any court, legislative body, governmental agency or other authority having jurisdiction over the PSF; or the PSF shall deny that it has any further liability or obligation under the PSF guarantee, the order or any Bond, as appropriate; (iii) the PSF shall commence a voluntary case under the Federal bankruptcy laws or shall consent to or fail to contest for 60 consecutive calendar days any petition filed against it in an involuntary case under Federal bankruptcy law; (iv) a case or other proceeding shall be commenced against the PSF in any court of competent jurisdiction seeking (A) relief under the Federal bankruptcy laws or under any other law, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, or (B) the appointment of a trustee, receiver, custodian, liquidator or the like for the PSF, or for all or a substantial part of its property, and any such case or proceeding shall continue undismissed and unstayed for a period of 60 consecutive calendar days; (v) the PSF shall fail to pay any amount of principal of or interest on any other obligation or debt guaranteed by the PSF when the same shall become due and payable; or (vi) the rating on the Bonds by all rating agencies then rating the Bonds shall be withdrawn or suspended for credit related reasons or reduced below investment grade.

The Bonds will continue to bear interest at the weekly rate and pay interest on the first business day of each month. The Bonds may be converted, in whole, to the monthly, flexible, term or fixed rate mode. Upon such conversion the Bonds will be subject to mandatory tender. The short-term rating will apply to the Bonds only while the Bonds bear interest in the weekly, monthly, flexible or term rate mode. Bonds in the monthly rate mode will also pay interest on the first business day monthly while Bonds term rate modes will pay interest semiannually on February 1st and August 1st. Bonds in the flexible rate mode will pay interest on the first business day following the last day of each flexible rate period.

Bondholders may, at their option, tender their bonds during the weekly rate mode on any business day with at least seven days prior written notice to the tender agent and during the monthly rate mode on any monthly interest reset date with at least seven business days prior written notice to the tender agent.

The Bonds will be subject to mandatory tender upon: (1) each interest rate conversion date; (2) the first business day following each flexible rate period and the last interest interest payment date of each term rate period; (3) the business day prior to each SBPA substitution date; (4) the business day preceding the expiration or termination of the SBPA; and (5) the business day prior to the termination of the SBPA following the tender agent 's receipt of notice from the Bank indicating that an event of default has occurred and the SBPA shall terminate on the 15th business days following receipt thereof.

Each SBPA will cover full principal plus 275 days of interest at 8%, the maximum rate on the Bonds and provides sufficient coverage for the Bonds while they bear interest in the weekly, monthly, flexible or term rate modes. Moody's short-term ratings will expire upon conversion to the fixed rate mode. The SBPA will be available to pay purchase price to the extent remarketing proceeds received are insufficient.

Draws made on the applicable SBPA received at or prior to 11:00 a.m., Eastern Time (ET), will be honored by 1:00 p.m., ET, on the same business day. Draws made under the SBPA will be reinstated upon reimbursement of such drawings.

Each SBPA commitment will terminate upon the earliest to occur of: (i) February 14, 2014, the stated expiration date, unless extended; (ii) the date of receipt by the Bank of notice from the paying agent/registrar stating that no Bonds remain outstanding; (iii) the close of business on the business day following conversion of the interest rate to the fixed rate mode; (iv) the date of substitution of the liquidity facility; and (v) the date which is 15 business days following receipt by the trustee of notice of termination from the Bank due to an event of default under the SBPA; or (vi) upon an automatic termination event under the SBPA.

WHAT COULD CHANGE THE SHORT TERM RATING-DOWN

The short-term rating on the Bonds could be lowered if the short-term OSO rating on the Bank or the long-term rating of the Bonds was downgraded.

PRINCIPAL METHODOLOGY

The principal methodology used in rating the bonds was Variable Rate Instruments Supported by Third-Party Liquidity Providers, published on November 3, 2006. Other methodologies and factors that may have been considered in the process of rating this issue can also be found on Moody's website.

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

Leslie Lukens
Analyst
Public Finance Group
Moody's Investors Service

Kristin Button
Backup Analyst
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 Aaa/VMIG 1 RATING FOR LUBBOCK INDEPENDENT SCHOOL DISTRICT (TX).
No Related Data.
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