$40 MILLION OF DEBT AFFECTED. RATING IS BASED ON THE JOINT SUPPORT FROM JPMORGAN CHASE BANK, N.A. AS LETTER OF CREDIT PROVIDER AND GUNDERSEN LUTHERAN
Expected Sale Date
NEW YORK, Sep 16, 2011 -- Moody's Investors Service has assigned a rating of Aa1/VMIG 1 to the
Wisconsin Health and Educational Facilities Authority Variable Rate Revenue
Bonds (Gundersen Lutheran), Series 2011B (the "Bonds"). The proceeds of the
Bonds will be used to (i) finance a portion of the costs of a renewal project
for the La Crosse campus of the Gundersen Lutheran Health System ("Gundersen"),
(ii) pay related expenses in issuing the Bonds, and (iii) pay fees for the
letter of credit.
SUMMARY RATINGS RATIONALE
The long term rating is based on a joint default analysis ("JDA") which reflects
Moody's approach to rating jointly supported transactions. The JDA rating is
based upon the long-term rating of JPMorgan Chase Bank, National Association
(the "Bank") as provider of the letter of credit; the underlying rating assigned
to the Bonds; and the structure and legal protections of the transaction which
ensure 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. Moody's currently rates JPMorgan
Chase Bank, N.A. long-term and short-term other senior obligations
("OSO") Aa1/P-1, respectively. Moody's currently maintains an underlying rating
of A1 on the Bonds.
Since a loss to investors would occur only if both the Bank and
Gundersen default in payment, Moody's has assigned the long-term rating based
upon the joint probability of default by both parties. In determining the joint
probability of default, Moody's considers the level of default dependence
between the Bank and Gundersen. Moody's has determined that there is a low level
of default dependence between the Bank and Gundersen. As a result, the joint
probability of default for the Bank and Gundersen results in a credit risk
consistent with a JDA rating of Aa1 for the Bonds.
DETAILED CREDIT DISCUSSION
Interest Rate Modes And Payment
The Bonds will initially bear interest in a weekly rate mode with interest to be
paid on the first (1st) business day of each month, commencing October 3, 2011.
The Bonds may be converted, in whole, to a daily, R-FLOATs, special
R-FLOATs, unit pricing, indexed, stepped coupon, term, auction, fixed, or index
floating rate mode. The letter of credit will provide sufficient coverage for
the Bonds, however, while they bear interest in the weekly or daily rate modes
only. Moody's JDA and short-term ratings apply only to Bonds bearing interest in
the weekly or daily rate modes.
The Indenture does not permit the issuance of additional Bonds.
Flow of Funds
The trustee is instructed to draw under the letter of credit in accordance with
its terms thereof at the times and in amounts required to pay when due the
principal and interest on the Bonds. In the event that the Bank fails to honor
any principal or interest drawing, and on such payment date there are
insufficient funds on deposit with the trustee to make such payment, the trustee
shall immediately notify Gundersen of such deficiency, and upon such notice from
the trustee, Gundersen shall provide immediately available funds to the trustee
in an amount necessary for the trustee to make timely payments of
principal and/or interest to the holders of the Bonds. The trustee shall also
draw for purchase price under the letter of credit, in accordance with its terms
thereof by such times and in such manners as to receive sufficient funds by 2:30
p.m. (New York City time) to pay the purchase price of Bonds tendered to the
extent remarketing proceeds received 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 Bonds.
Direct Pay Letter Of Credit
The letter of credit provided by the Bank is sized for the full principal amount
plus thirty-four (34) days of interest at a rate of 15%, the maximum rate on the
Bonds. The letter of credit provides sufficient coverage for the Bonds while
they bear interest in the weekly and daily rate modes only. The letter of credit
is governed by and construed in accordance with the International Standby
Practices 1998, International Chamber of Commerce Publication No. 590 (ISP98).
Draws On the Letter Of Credit
Conforming draws for principal or interest received by the Bank at or before
3:00 p.m. on a business day will be honored by 10:00 a.m. on the next business
day. Conforming draws for purchase price received by the Bank at or before
12:15 p.m. on a business day will be honored by 2:15 p.m. on the same business
day. (All times refer to local time in effect in New York, New York).
Reinstatement of Interest Draws
Draws made under the letter of credit for interest shall be
automatically reinstated immediately upon payment by the Bank of such drawing.
Reimbursement Agreement Defaults
In the event of a default under the reimbursement agreement, the Bank may, at
its option, deliver written notice to the trustee stating that such event of
default under the reimbursement agreement has occurred and direct the trustee to
either accelerate or cause a mandatory tender of the Bonds. With direction to
cause a mandatory tender of the Bonds, the trustee shall do so not later than
two business days following the trustee's receipt of notice from the Bank of an
event of default under the reimbursement agreement directing the trustee to
cause a mandatory tender. With direction to accelerate the Bonds, the trustee
shall declare the entire principal amount of the Bonds then outstanding and the
interest accrued thereon to become and be immediately due and payable. Interest
shall cease to accrue upon such declaration. The trustee is instructed to draw
on the letter of credit to pay the principal and interest on the Bonds no later
than one business day after the date the Bonds are declared due and payable. The
letter of credit will terminate fifteen calendar days following the trustee's
receipt of notice from the Bank of an event of default under the
reimbursement agreement directing either a mandatory tender or an acceleration
of the Bonds.
Expiration / Termination of the Letter Of Credit
The letter of credit expires at the close of business on the earliest to occur
of (i) September 29, 2016, the stated expiration date of the letter of credit;
(ii) the earlier of (a) the date which is thirty-five calendar days following
the conversion of the Bonds to an interest rate mode other than the daily or
weekly rate mode, or (b) the date which the Bank honors a drawing under the
letter of credit on or after the conversion date; (iii) the date which is
fifteen calendar days following the Bank's receipt of notice from the
trustee that (a) no Bonds remain outstanding, (b) all required
drawings available under the letter of credit have been made and honored, or (c)
a substitute letter of credit has been issued to replace the existing letter of
credit; (iv) the date which an acceleration drawing is honored by the Bank; or,
(v) the date which is fifteen calendar days following the trustee's receipt of
notice from the Bank specifying the occurrence of an event of default under the
reimbursement agreement directing the trustee to either accelerate or cause a
mandatory tender of the Bonds.
The Indenture permits the substitution of the letter of credit. The Bonds are
subject to mandatory tender on the substitution date of the letter of credit.
Draws for purchase price upon the substitution of the letter of credit will be
made under the existing letter of credit. The trustee is instructed to surrender
such letter of credit following the honoring of all required draws thereunder.
Bondholders may optionally tender their Bonds, while the Bonds are in the weekly
rate mode, on any business day by providing written notice to the trustee,
tender agent, and remarketing agent by 4:00 p.m. at least seven calendar days
prior to the purchase date. Bondholders may also, at their option, tender their
Bonds during the daily rate mode on any business day by providing written notice
delivered to the trustee, tender agent, and remarketing agent by 10:00 a.m. on
the purchase date. Bonds so tendered will be purchased from their bondholders on
the tender date at a purchase price equal to the amount of principal and any
interest accrued thereon to the tender date. (All times refer to local time in
effect in New York, New York).
The Bonds are subject to mandatory tender: (i) on any interest rate mode
conversion date; (ii) on the business day preceding the expiration date of the
letter of credit; (iii) on the business day prior to the voluntary termination
date of the letter of credit as determined by Gundersen; (iv) on the effective
date of any substitute credit or liquidity facility; (v) not more than two
business days following the trustee's receipt of notice from the Bank specifying
(a) the occurrence of an event of default under the reimbursement agreement or
(b) the non-reinstatement of the letter of credit and directing a mandatory
tender of the Bonds; and, (vi) at the end of the period for Bonds bearing
interest in the unit pricing, index floating, R-FLOATs, or the term rate mode.
Purchases in Lieu of Redemption
Bonds subject to redemption at the option of the borrower are subject to
purchases in lieu of redemption by the borrower, at its option, on the date
scheduled for redemption. Such Bonds shall be purchased at a price of par plus
interest accrued to the purchase date, without premium. Such purchases shall be
funded by the trustee using preference proof moneys held on deposit with the
trustee, pursuant to the terms of the trust indenture.
The Bonds are subject to mandatory sinking fund redemptions.
WHAT COULD CHANGE THE RATING-UP
Long-Term: The long-term rating on the Bonds could be raised if the Bank's
long-term OSO rating is upgraded or the underlying rating on the Bonds is
Short-Term: Not Applicable.
WHAT COULD CHANGE THE RATING-DOWN
Long-Term: The long-term rating on the Bonds could be lowered if the Bank's
long-term OSO rating or the underlying rating on the Bonds is downgraded or if
the default dependence increases.
Short-Term: The short-term rating on the Bonds could be lowered if the Bank's
short-term OSO rating is downgraded.
Trustee: U.S. Bank, N.A.
Underwriter/Remarketing Agent: Merrill Lynch, Pierce, Fenner & Smith Inc.
The principal methodologies used in this rating were Applying Global
Joint Default analysis to Letter of Credit Backed Transactions in the
U.S. Public Finance Sector published in October 2010 and Moody's Methodology for
Rating U.S. Public Finance Transactions Based on the Credit Substitution
Approach published in August 2009. Please see the Credit Policy page on
www.moodys.com for a copy of these methodologies.
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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
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Public Finance Group
Moody's Investors Service
Michael J. Loughlin
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 WISCONSIN HEALTH AND EDUCATIONAL FACILITIES AUTHORITY VARIABLE RATE REVENUE BONDS (GUNDERSEN LUTHERAN), SERIES 2011B
Moody's Investors Service, Inc.
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