$24.825 MILLION IN DEBT AFFECTED. LONG-TERM RATING BASED ON JOINT SUPPORT OF JPMORGAN CHASE BANK, N.A. AS LOC PROVIDER AND MUNSON HEALTHCARE.
Grand Traverse County Hosp. Fin. Auth., MI
Expected Sale Date
NEW YORK, Aug 1, 2011 -- Moody's Investors Service has assigned a rating of Aa1/VMIG 1 to the County of
Grand Traverse Hospital Finance Authority, Variable Rate Revenue Refunding Bonds
(Munson Healthcare Obligated Group), Series 2011B ("the Bonds"). The Bonds are
supported by a direct-pay letter of credit provided by JPMorgan Chase Bank,
National Association ("the Bank" or "the LOC provider").
SUMMARY RATINGS RATIONALE
The long-term rating reflects Moody's approach to rating jointly supported
transactions and is based upon the letter of credit ("LOC") provided by JPMorgan
Chase Bank, National Association; the underlying rating assigned to the Bonds;
the structure and legal protections of the transaction, which ensure timely debt
service payments to investors; and Moody's evaluation of the creditworthiness of
the institution providing the letter of credit. The probability of timely
payment of purchase price is reflected in the short-term rating of the Bonds
which is based upon the short-term rating of the Bank as provider of the letter
of credit. Moody's currently rates JPMorgan Chase Bank, N.A.'s, long-term other
senior obligations ("OSO") Aa1 and short-term OSO P-1 . The long-term OSO rating
of JPMorgan Chase Bank, N.A. is under review for downgrade. Moody's currently
maintains a rating of A1 on the underlying bonds. For more information
concerning the underlying rating assigned to the Bonds, please see the report
dated July 15, 2011.
Since a loss to investors would occur only if both the Bank and
Munson Healthcare (the 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
considered the level of default dependence between the LOC provider and the
Borrower and found it to be low. As a result, the joint probability of default
for the Bank and the Borrower results in a credit risk consistent with a rating
DETAILED CREDIT DISCUSSION
Interest Rate Modes and Payment
The Series 2011B Bonds will initially bear interest at the weekly rate and pay
interest on the first business day of the month, commencing in September of
2011. The Bonds may be converted, in whole to bear interest at the daily,
adjustable or fixed rate modes and are subject to mandatory tender upon such
conversion. Moody's joint support rating and short-term rating applies to the
Bonds while they bear interest in the daily and weekly rate modes and will
expire upon conversion of the Bonds to any other rate mode.
The trust indenture does not permit the issuance of additional bonds of this
Flow Of Funds
The trustee is instructed to draw under the letter of credit for principal or
interest in accordance with the terms of such LOC to receive funds by 2 p.m. New
York, New York time on the principal or interest payment date. In the event that
the Bank wrongfully fails to honor any properly presented draw under the LOC,
the trustee is instructed to utilize funds from the Borrower, if available, in
order to make such payments to bondholders in a full and timely manner.
The trustee is instructed to draw under the letter of credit in accordance with
its terms on the purchase date, for purchase price, 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 written confirmation from the Bank stating that the letter of
credit has been reinstated in the amount of the purchase price drawn for such
Letters Of Credit
The letters of credit are sized for full principal plus 35 days of interest at
the maximum rate on the Bonds (10%) and will provide coverage for Bonds while
they bear interest in the daily and weekly rate modes.
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, New York time, on a business day, will be honored by the
Bank at or before 10:00 a.m. on the next business day. Conforming draws
for purchase price presented to the Bank at or before 11:00 a.m. New York, New
York time, on a business day, will be honored by the Bank at or before 2:00 p.m.
on the same business day.
Reinstatement Of Interest Draws
Draws made under the letter of credit for interest shall be
automatically reinstated upon payment by the Bank of such interest drawing.
Reimbursement Agreement Defaults
In the event of a default under the reimbursement agreement the Bank may send
written notice to the trustee stating that such default has occurred with
direction to accelerate the Bonds. Upon receipt of such notice, the trustee
shall accelerate the Bonds, declare such Bonds immediately due and payable and
the trustee shall draw on the letter of credit. The LOC will expire 15 days
following the trustee's receipt of such notice.
Expiration / Termination Of The Letter Of Credit
The LOC shall terminate upon the earliest to occur of: (1) August 10, 2016; (2)
the earlier of (i) 15 days following the date on which all Bonds have been
converted to a rate mode other than the daily or weekly rate or (ii) the date
the Bank honors a drawing under the LOC on or after such conversion date; (3)
the date the Bank receives notice from the trustee indicating (i) an alternate
LOC has been issued, (ii) no Bonds remain outstanding, or (iii) all required
drawings required to be made under the indenture and available under the LOC
have been made and honored; (4) the date the acceleration drawing or
final drawing has been honored; (5) fifteen days following the trustee's receipt
of notice from the Bank indicating an event of default under the reimbursement
agreement directing the trustee to accelerate the Bonds.
Substitution of Letter of Credit
The Bonds will be subject to mandatory tender on the effective date of a
substitute LOC. Draws for purchase price upon the substitution of the LOC will
be made under the existing LOC. The existing LOC will not expire until the
trustee surrenders the existing LOC for cancellation. The trustee may not
surrender the existing LOC until all draws have been honored by the Bank.
Bondholders may optionally tender their Bonds when they are in (i) the daily
rate mode on any business day with written notice to the remarketing agent and
trustee by 10:00 a.m., New York, New York time, on the purchase date and (ii)
the weekly rate mode on any business day with seven days prior written notice to
the remarketing agent and trustee.
The Bonds are subject to mandatory tender on the following dates: (1) the
interest rate conversion date; (2) the effective date of a substitute LOC; (3)
on the interest payment date prior to the expiration date of the LOC; or (4) in
the adjustable rate mode, on the business day next succeeding the last day of
the then current adjustable rate period.
The Bonds are subject to mandatory sinking fund redemptions.
WHAT COULD CHANGE THE RATINGS-UP
Long-Term: The long-term rating on the Bonds could be raised if the Bank's
long-term other senior obligations ("OSO") rating is upgraded or the underlying
rating on the Bonds is upgraded above the rating of the Bank.
Short-Term: Not applicable.
WHAT COULD CHANGE THE RATINGS-DOWN
Long-Term: The long-term rating on the Bonds could be lowered if the Bank's
long-term OSO rating is downgraded.
Short-Term: The short-term rating on the Bonds could be lowered if the Bank's
short-term OSO rating is downgraded.
Trustee: The Bank of New York Mellon Trust Company, N.A.
Remarketing Agent and Underwriter: Merrill Lynch, Pierce, Fenner and Smith
PRINCIPAL METHODOLOGIES USED
The principal methodologies used in this rating were Moody's Methodology for
rating U.S. Public Finance Transactions based on the Credit Substitution
Approach published in August 2009 and Applying Global Joint Default Analysis to
Letter of Credit Backed Transactions in the U.S. Public Finance Sector published
in October 2010. Please see the Credit Policy page on www.moodys.com for a copy
of these methodologies.
For ratings issued on a program, series or category/class of debt, this
announcement provides relevant regulatory disclosures in relation to each rating
of a subsequently issued bond or note of the same series or category/class of
debt or pursuant to a program for which the ratings are derived exclusively from
existing ratings in accordance with Moody's rating practices. For ratings issued
on a support provider, this announcement provides relevant regulatory
disclosures in relation to the rating action on the support provider and in
relation to each particular rating action for securities that derive their
credit ratings from the support provider's credit rating. For provisional
ratings, this announcement provides relevant regulatory disclosures in
relation to the provisional rating assigned, and in relation to a
definitive rating that may be assigned subsequent to the final issuance of the
debt, in each case where the transaction structure and terms have not
changed prior to the assignment of the definitive rating in a manner that
would have affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
Information sources used to prepare the rating are the following: parties
involved in the ratings, and public information.
Moody's considers the quality of information available on the rated entity,
obligation or credit satisfactory for the purposes of issuing a 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.
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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 COUNTY OF GRAND TRAVERSE HOSPITAL FINANCE AUTHORITY, VARIABLE RATE REVENUE REFUNDING BONDS (MUNSON HEALTHCARE OBLIGATED GROUP), SERIES 2011B
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007