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MOODY'S ASSIGNS Aa2/VMIG 1 LETTER OF CREDIT-BACKED RATING TO SERIES 2010B AND Aa1/VMIG 1 LETTER OF CREDIT-BACKED RATING TO SERIES 2010C OF CITY OF TORRANCE VARIABLE RATE REVENUE BONDS (TORRANCE MEMORIAL MEDICAL CENTER)

16 Sep 2010

$100.00 MILLION IN DEBT AFFECTED. LONG-TERM JDA RATING BASED ON LONG-TERM RATINGS OF CITIBANK, N.A. (SERIES 2010B) AND JPMORGAN CHASE BANK, N.A. (SERIES 2010C) AS LOC PROVIDERS AND TERRANCE MEDICAL CENTER.

Torrance (City of) CA
Fully Supported
CA

Moody's Rating

ISSUE

RATING

Ser. 2010B

Aa2/VMIG 1

  Sale Amount

$64,860,000

  Expected Sale Date

09/23/10

  Rating Description

JDA

 

Ser. 2010C

Aa1/VMIG 1

  Sale Amount

$35,140,000

  Expected Sale Date

09/23/10

  Rating Description

JDA

 

Opinion

NEW YORK, Sep 16, 2010 -- Moody's Investors Service has assigned Aa2/VMIG 1 to City of Torrance Variable Rate Revenue Bonds (Torrance Memorial Medical Center) Series 2010B and Aa1/VMIG 1 to City of Torrance Variable Rate Revenue Bonds (Torrance Memorial Medical Center) Series 2010C (collectively, the Bonds).

RATINGS RATIONALE

The long-term ratings are based on a joint default analysis (JDA) which reflects Moody's approach to rating jointly supported transactions. The JDA ratings are based upon the long-term ratings of Citibank, N.A. and JPMorgan Chase Bank, N.A. (collectively, the Banks) as providers of the letters of credit (LOC) for the Series 2010B and Series 2010C, respectively; the underlying rating of the Bonds; and the structure and legal protections of the transaction which ensures timely debt service payments to investors. The timely payment of purchase price is reflected in the short-term ratings of the Bonds. The short-term ratings of the Bonds are based upon the short-term ratings of the applicable Bank as provider of the applicable letter of credit.

Citibank N.A. is currently rated A1 for long-term other senior obligations (OSO) and Prime-1 for short-term OSO. JPMorgan Chase Bank, N.A. is currently rated Aa1 for long-term OSO and P-1 for short-term OSO. Moody's assigned an underlying rating of A2 to the Bonds on August 18, 2010. Please see the new issue report for more information on the underlying bonds.

Since a loss to investors would occur only if both the applicable Bank and Torrance Memorial Medical Center (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 considers the level of default dependence between the applicable Bank and the Borrower. Moody's has determined that there is a low level of default dependence between each Bank and the Borrower. As a result, the joint probability of default for each Bank and the Borrower results in a credit risk consistent with a JDA ratings of Aa2 for Series 2010B and Aa1 for Series 2010C.

Interest Rate Modes and Payment

The Bonds initially will bear interest in a weekly rate mode and interest will be paid on the first Wednesday of each month. The bond indentures permit conversion of the Bonds, in whole by the series, to a daily, term or fixed interest rate period and upon any conversion the applicable series of Bonds will be subject to mandatory purchase. The ratings apply to the Bonds bearing interest in the weekly period only.

Additional Bonds

No additional bonds shall be issued under each bond indenture.

Flow of Funds

The trustee is instructed to draw under the applicable LOC in accordance with its terms on a business day next preceding each principal and interest payment date in order to receive funds by 2:30 p.m. Eastern time, on such payment date. If the Bank fails to honor a draw under the applicable LOC, the trustee shall immediately notify the Borrower and demand payment of such amount. The trustee is also instructed to draw under the applicable LOC by 11:30 a.m., Eastern time, on each purchase date 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 confirmation from the applicable Bank stating that the applicable LOC has been reinstated in the amount of the purchase price drawn for such Bonds.

Letters of Credit

Each LOC is sized for full principal plus 43 days of interest at the maximum rate applicable to the Bonds (12%) and will provide coverage for the Bonds while they bear interest in the weekly rate mode. Each letter of credit is subject to the International Standby Practice, (ISP98), International Chamber of Commerce Publication 590.

Draws on the Letter of Credit

Conforming draws for principal and interest presented to the applicable Bank at or before 3:00 p.m., New York City time, on a business day, will be honored by such Bank no later than 2:30 p.m., New York City time, on the next business day. Conforming draws for purchase price presented to the applicable Bank at or before 11:30 a.m., New York City time, on a business day, will be honored by such Bank no later than 2:30 p.m., New York City time, on such business day.

Substitution of the Letters of Credit

Each series of Bonds will be subject to mandatory tender on the date of substitution with an alternate letter of credit. Draws for purchase price upon the substitution will be made under the applicable existing LOC and the existing LOC will not be surrendered to the applicable Bank for cancellation until after such tender draw is honored.

Reinstatement of Interest Draws

Draws made under the applicable LOC for interest shall be automatically reinstated on the opening of business on the sixth (6th) day after such interest drawing unless the trustee receives a notice from the applicable Bank before the close of business on the fifth (5th) day after such drawing stating that an event of default under the reimbursement agreement has occurred and directing a mandatory purchase or acceleration of the applicable series of Bonds. Upon acceleration, the trustee will immediately declare the principal of and accrued interest on the applicable series of Bonds due and payable and interest on such Bonds will accrue only to the date of such declaration. For mandatory tender, the applicable series of Bonds will be subject to mandatory tender on the business day following trustee's receipt of the notice. Each LOC terminates on the third (3rd) business day following the trustee's receipt of the notice form the Bank stating that an event of default under the reimbursement agreement has occurred.

Reimbursement Agreement Defaults

Each Bank may, at its option, send to the trustee stating that an event of default under the applicable reimbursement agreement has occurred and direct the trustee to either accelerate the principal and interest due on the applicable Bonds or direct the trustee to purchase the applicable Bonds on the mandatory tender date. Upon the trustee's receipt of a notice with direction to accelerate, the trustee shall declare the applicable Bonds immediately due and payable (at which time interest will cease to accrue) and immediately draw on the applicable letter of credit. If directing a mandatory purchase the applicable Bonds will be subject to mandatory tender on the business day following trustee's receipt of the notice, but no later than second (2nd) business day preceding expiration or termination of the applicable LOC.

Bond Indenture Events of Default Related to Payment

Upon a failure to pay when due the principal or interest on the applicable series of Bonds, the trustee may, and with the written consent of the applicable Bank, shall declare the principal and interest accrued on all the applicable Bonds to be due and payable immediately. Interest ceases to accrue on the date of declaration. Additionally, upon a failure to pay the purchase price by the applicable Bank and only if such purchase price continues to be unpaid for a period of 365 days following the purchase date, the trustee may, and with the written consent of the applicable Bank, shall declare the principal and interest accrued on all the Bonds to be due and payable immediately. Interest ceases to accrue on the date of declaration.

Expiration / Termination of the Letters of Credit

Each letter of credit shall terminate upon the earliest to occur of: (i) September 23, 2013, the stated expiration date; (ii) the earlier of (A) first business day following conversion of an interest rate of the applicable Bonds to a rate other than a weekly interest rate, or (B) the date on which the applicable Bank honors a drawing under the applicable LOC in connection with such conversion; (iii) the first to occur of (A) the third (3rd) business day following receipt by the trustee of a written notice from the applicable Bank stating that an event of default under the reimbursement agreement has occurred, or (B) the date on which the applicable Bank honors a drawing under the applicable LOC in connection with such notice; or (iv) receipt by the applicable Bank of a certificate from the trustee stating that a substitute LOC has been accepted.

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 tender agent and the remarketing agent.

Mandatory Purchases

Each series of Bonds is subject to mandatory purchase on the following dates: (i) each interest rate conversion date; (ii) the effective date of any substitution of applicable LOC, (iii) the fifth (5th) business day preceding the stated expiration date of the applicable LOC; (iv) the first (1st) business day following receipt by the trustee of notice from the applicable Bank stating that an event of default under the reimbursement agreement has occurred and directing a mandatory tender of the applicable series of Bonds; or (v) any business day as specified in a written notice from the Borrower but not earlier than ten (10) days following the second (2nd) business day after trustee's receipt of such notice from the borrower.

What Could Change the Rating-Up

Long-Term: the long-term rating on the applicable series of Bonds could be upgraded if the long -term OSO rating of the applicable Bank or the long-term rating of the Borrower was upgraded, or if there was a decrease in the level of default dependence between the applicable Bank and the Borrower.

Short-Term: N/A

What Could Change the Rating-Down

Long-Term: the long-term rating on the applicable series of Bonds could be lowered if the long term OSO rating of the applicable Bank or the long-term rating of the Borrower was downgraded, or if there is an increase in the level of default dependence between the applicable Bank and the Borrower.

Short-Term: the short-term rating on the applicable series of Bonds would be lowered if the short-term OSO rating, on the applicable Bank was downgraded.

Contacts

Underwriters / Remarketing Agents: Citigroup Global Markets Inc. (Series 2010B); J.P. Morgan Securities (Series 2010C)

Trustee: The Bank of New York Mellon Trust Company, N.A.

METHODOLOGY

The principal methodologies used in rating this issue were Moody's Approach to Rating Letter of Credit Supported Transactions published in August 2005 and Applying Global Joint Default analysis to Letter of Credit Backed Transactions in the U.S. Public Finance Sector published in September 2010. Other methodologies and factors that may have been considered in the process of rating this issue can also be found on Moody's website.

REGULATORY DISCLOSURES

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.

Analysts

Jacek Stolarz
Analyst
Public Finance Group
Moody's Investors Service

Michael J. Loughlin
Senior Credit Officer
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 ASSIGNS Aa2/VMIG 1 LETTER OF CREDIT-BACKED RATING TO SERIES 2010B AND Aa1/VMIG 1 LETTER OF CREDIT-BACKED RATING TO SERIES 2010C OF CITY OF TORRANCE VARIABLE RATE REVENUE BONDS (TORRANCE MEMORIAL MEDICAL CENTER)
No Related Data.
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