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MOODY'S ASSIGNS Aa2 (ON REVIEW FOR DOWNGRADE)/VMIG 1 LETTER OF CREDIT BACKED RATING TO THE PARISH OF ST. JAMES, STATE OF LOUISIANA REVENUE BONDS (NUSTAR LOGISTICS L.P. PROJECT) SERIES 2011

25 Jul 2011

$75 MILLION DEBT AFFECTED. RATING IS BASED ON A DIRECT PAY LETTER OF CREDIT PROVIDED BY WELLS FARGO BANK, NATIONAL ASSOCIATION

NuStar Logistics L.P.
Fully Supported
LA

Moody's Rating

ISSUE

RATING

Ser. 2011

Aa1/VMIG 1

  Sale Amount

$75,000,000

  Expected Sale Date

08/09/11

  Rating Description

LOC backed

 

Opinion

NEW YORK, Jul 25, 2011 -- Moody's Investor Services has assigned a rating of Aa2/VMIG 1 to the Parish of St. James, State of Louisiana Revenue Bonds (NuStar Logistics, L.P. Project) Series 2011. The long term Aa2 rating is on review for downgrade.

The Bonds proceeds will be used to finance the cost of acquiring, constructing and installing new tanks which provides 4.8 million barrels of additional storage capacity, new tank lines, pumps, manifolds for the new tanks and additional rail car off loading facilities, located at NuStar St. James Terminal on the west bank of the Mississippi River in the Parish of St. James, Louisiana.

RATINGS RATIONALE

The rating is based upon (i) a direct-pay letter of credit ("LOC") provided by Wells Fargo Bank, National Association (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 Aa2 for its other senior obligations (OSO) and Prime-1 for its short term OSO. The long term Aa2 rating is on review for possible downgrade. 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 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.

Additional Bonds

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. To the extent that remarketing proceeds are insufficient, the trustee is also instructed to draw on the letter of credit in accordance with its term in order to receive payment on each purchase date for the purchase of all Bonds that are due and payable.

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 44 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 Available Amount of the Letter of Credit will be reduced automatically by the amount of any drawing under the Letter of Credit; provided, however, that the amount of any Interest Drawing under the Letter of Credit, less the amount of the reduction in the Available Amount attributable to interest, shall be automatically reinstated effective at 11:00 a.m., New York City time, five (5) calendar days from the date such drawing is honored by the Bank unless the Trustee receives notice from the Bank at or before the Bank's close of business on the fourth (4th) calendar day after such date that the Bank has not been reimbursed in full for any such drawing or any other Event of Default has occurred and as a consequence thereof the Letter of Credit will not be so reinstated. Upon receipt of either 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 acceleration.

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 acceleration.

Expiration / Termination of Letter of Credit

The letter of credit will terminate on the earliest to occur of: (i) August 8, 2012; (ii) the earlier of: (a) 5 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) 5 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.

Substitution

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.

Optional Tenders

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 purchase date.

Mandatory Purchases

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 letter of credit (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.

Key Contacts

Trustee: The Bank of New York Mellon.

Remarketing Agent: SunTrust Robinson Humphrey, Inc

PRINCIPAL METHODOLOGY

The principal methodology used in this rating was Moody's Methodology for Rating U.S. Public Finance Transactions on the Credit Substitution Approach published in August 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology .

REGULATORY DISCLOSURES

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.

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

Emily Korot
Analyst
Public Finance Group
Moody's Investors Service

David A. Parsons
Senior Credit Officer
Public Finance Group
Moody's Investors Service

Contacts

Journalists: (212) 553-0376
Research Clients: (212) 553-1653


Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
USA

MOODY'S ASSIGNS Aa2 (ON REVIEW FOR DOWNGRADE)/VMIG 1 LETTER OF CREDIT BACKED RATING TO THE PARISH OF ST. JAMES, STATE OF LOUISIANA REVENUE BONDS (NUSTAR LOGISTICS L.P. PROJECT) SERIES 2011
No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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