$85 MILLION DEBT AFFECTED. RATING IS BASED ON A DIRECT PAY LETTER OF CREDIT PROVIDED BY JPMORGAN CHASE BANK, N.A.
NuStar Logistics L.P.
Expected Sale Date
NEW YORK, Dec 21, 2010 -- Moody's Investor Services has assigned a rating of Aa1/VMIG 1 to the Parish of
St. James, State of Louisiana Revenue Bonds (NuStar Logistics, L.P. Project)
The Bonds proceeds will be used to finance the cost of acquiring, constructing
and installing of an addition of 4.8 million barrels of additional storage
capacity comprised of new tanks, new tank lines, pumps and manifolds for new
tanks located at NuStar St. James Terminal on the west bank of the Mississippi
River in the Parish of St. James, Louisiana.
The rating is based upon (i) a direct-pay letter of credit provided by JPMorgan
Chase Bank, N.A. (the Bank), (ii) the structure and legal protections of the
transaction, which ensure timely payment of debt service and purchase price to
bondholders; and (iii) Moody's evaluation of the credit quality of the bank
issuing the letter of credit.
Moody's currently rates the Bank Aa1 for its other senior obligations (OSO) and
Prime-1 for its short term OSO. NuStar Logistics, L.P. has a senior unsecured
rating of Baa3; however, the structure of this transaction does not support our
joint default methodology and therefore the rating assigned to the Bonds
reflects the rating of the Bank only.
Interest Rate Modes and Payments
The Bonds will be initially issued in the weekly rate mode and will pay interest
on the first Wednesday of each month. The Bonds may be converted in whole to
bear interest at the daily, commercial paper or long term interest rate modes
and are subject to mandatory tender upon each conversion to a different mode
(except conversions between the daily and weekly modes). Moody's letter of
credit backed rating applies to the Bonds while in the weekly or daily rate
modes. While in the daily interest rate mode interest is paid on the fifth (5th)
business day of each month.
The trust indenture does not allow the issuance of additional Bonds.
Flow of Funds
The trustee is instructed to draw on the letter of credit for principal and
interest in accordance with its terms to make full and timely payments of
principal and interest, on the Bonds. The trustee is also instructed to draw in
accordance with its term on the letter of credit in order to receive payment on
each purchase date for the purchase of all Bonds due and payable to the extent
that remarketing proceeds are insufficient.
Bonds which are purchased by the Bank due to a failed remarketing are held by
the trustee as pledged bonds. Pledged bonds will not be delivered to new
purchasers following remarketing until the Bank has confirmed that the letter of
credit has been reinstated in full.
Direct Pay Letter of Credit
The letter of credit provided by the Bank is sized for the full principal amount
plus 40 days of interest at a rate of 12%, the maximum rate on the Bonds. The
letter of credit provides sufficient coverage for the Bonds while they bear
interest in the weekly or daily modes.
Draws on the Letter of Credit
Conforming draws for principal and/or interest received by the Bank by 3:00
p.m., New York City time, on a business day will be honored by 10:00 a.m., New
York City time, on the next business day. Conforming draws for the payment of
purchase price received by the Bank by 12:30 p.m., New York City time, on the
purchase date will be honored by 2:30 p.m., New York City time, on such date.
Reinstatement on Interest Draws
The interest component of the letter of credit will be automatically
reinstated immediately upon the payment of such draw.
Reimbursement Agreement Defaults
The Bank may send written notice to the trustee stating that an event of default
under the reimbursement agreement has occurred, and directing the trustee to
accelerate the maturity of the Bonds. Upon receipt of such notice, the trustee
shall declare the Bonds to be immediately due and payable and immediately draw
on the letter of credit. Interest shall cease to accrue upon declaration of
Indenture of Trust Events of Default Related to Payments
Upon a failure to pay the principal, interest or purchase price on the Bonds
when due and payable, the trustee may, upon the written request of the owners of
at least a majority of the then outstanding Bonds, accelerate all outstanding
Bonds. Upon receipt of such request, the trustee shall declare the Bonds to be
immediately due and payable and immediately draw on the letter of credit.
Interest shall cease to accrue upon declaration of the acceleration.
Expiration / Termination of Letter of Credit
The letter of credit will terminate on the earliest to occur of: (i) December
28, 2011, the stated expiration date; (ii) the earlier of: (a) 15 days following
conversion to an interest rate other than weekly or daily, or (b) the date on
which the Bank honors a drawing on the letter of credit on or after such
conversion; (iii) 15 days following the Bank's receipt of the trustee's
certification that either: (a) no Bonds remain outstanding, or (b) all
drawings required to be made under the indenture or available under the
letter of credit have been made and honored; (iv) the date on which the Bank
honors an acceleration drawing; (v) 15 days following the trustee's receipt of
notice of an event of default under the reimbursement agreement notice with
direction to accelerate; and (v) the date on which the Bank honors a mandatory
tender drawing upon the substitution of the letter of credit.
The effective date of any alternate letter of credit must be scheduled on an
interest payment date. Bonds are subject to mandatory tender on such effective
date of an alternate letter of credit. The trustee is instructed to draw on the
existing letter of credit for such mandatory tender. The existing letter of
credit will expire on the date which the Bank honors such mandatory tender.
Bondholders may optionally tender their Bonds on any business day during the
weekly rate mode with seven days prior written notice to the trustee and the
remarketing agent. While in the daily rate mode, bondholders may optionally
tender their Bonds on any business day upon delivery of the notice to the
trustee and the remarketing agent by 10:30 a.m. New York City time, on the
The Bonds are subject to mandatory tender on the following dates: (i) each
interest rate conversion date other than between daily and weekly rate modes;
(ii) the interest payment date prior to the expiration of the LOC (provided that
such interest payment date shall precede the expiration date of the LOC by not
less than two (2) business days); (iii) the interest payment date concurrent
with the effective date of a substitute LOC; or (iv) the first interest payment
date following the occurrence of a determination of taxability.
What Could Change the Change the Ratings-Up
Long-Term: The long-term rating on the Bonds could be raised if the long-term
OSO rating on the Bank was upgraded.
Short-Term: Not applicable.
What Could Change the Ratings-Down
Long-Term: The long-term rating on the Bonds could be lowered if the long-term
OSO rating on the Bank was downgraded.
Short-Term: The short-term rating on the Bonds could be lowered if the
short-term OSO rating on the Bank was downgraded.
Trustee: The Bank of New York Mellon.
Remarketing Agent: SunTrust Robinson Humphrey, Inc
The principal methodology used in this rating was Moody's Rating Methodology for
Letter of Credit Supported Transactions published in August 2005.
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 assigning 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.
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 ASSIGNS Aa1/VMIG 1 LETTER OF CREDIT BACKED RATING TO THE PARISH OF ST. JAMES, STATE OF LOUISIANA REVENUE BONDS (NUSTAR LOGISTICS L.P. PROJECT) SERIES 2010B
Moody's Investors Service
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New York, NY 10007