$175 MILLION OF DEBT AFFECTED. RATING IS BASED ON THE JOINT SUPPORT FROM SWEDISH HEALTH SERVICES AND CITIBANK, NATIONAL ASSOCIATION, AS LETTER OF CREDIT PROVIDER.
Washington Health Care Facilities Auth
Expected Sale Date
Expected Sale Date
NEW YORK, Feb 15, 2011 -- Moody's Investors Service has assigned a rating of Aa2/VMIG 1 to the
Washington Health Care Facilities Authority Revenue Bonds (Swedish Health
Services), Series 2011B and 2011C (collectively, the Bonds). The proceeds are to
be used to: (i) currently refund certain outstanding bonds previously issued by
the Washington Health Care Facilities Authority; (ii) finance a portion of
certain capital expenditures incurred for the remodeling, constructing,
acquiring and equipping of Swedish Health Services' inpatient, outpatient, and
administrative facilities; and, (iii) pay certain costs of issuing the Bonds.
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 Citibank, National Association (the Bank) as
provider of the letters of credit; the underlying rating assigned to the Bonds;
and the structure and legal protections of the transaction which ensures timely
debt service payments to investors. Each Series is supported by a
separate, substantially identical letter of credit. 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. Citibank, National
Association is currently rated A1 for long-term other senior obligations (OSO)
and Prime-1 for short-term OSO. Moody's currently maintains an underlying rating
of A2 on the Bonds.
Since a loss to investors would occur only if both the Bank providing the
letters of credit and Swedish Health Services (the Borrower) default in payment,
Moody's has assigned ratings 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 the Borrower. Moody's has
determined that there is a low level of default dependence between the Bank and
the Borrower. As a result, the joint probability of default for the Bank and
the Borrower results in a credit risk consistent with a JDA rating of Aa2
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) Wednesday of each month. The Bonds may be converted, in
whole, to a daily or long-term interest rate mode. The letter of credit will
provide sufficient coverage for the Bonds while they bear interest in the weekly
mode only. Moody's JDA and short-term ratings will not extend to the Bonds while
they bear interest in the daily or long-term interest rate modes.
The indenture does not permit the issuance of additional bonds.
Flow of Funds
The trustee is instructed to draw under the applicable letter of credit, in
accordance with its terms, in order to receive sufficient funds by 1:00 p.m.,
Eastern Time (ET), on any payment date in order to make any payments of
principal and/or accrued interest due on any such interest payment date, stated
maturity date, or redemption date of the Bonds. In the event the Bank fails to
deposit such moneys by the time required, the trustee shall utilize funds of the
Borrower to make such payments to bondholders. The trustee is instructed to draw
under the letter of credit, on each purchase date, for purchase price, 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 Letters Of Credit
The letters of credit provided by the Bank are sized for the full
principal amount plus fifty-two (52) days of interest at a rate of 12%, the
maximum rate on the Bonds. The letters of credit provide sufficient coverage for
the Bonds while they bear interest in the weekly rate mode 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 Letters Of Credit
Conforming draws for principal or interest received by the Bank at or before
2:00 p.m., ET, on a business day will be honored by 1:00 p.m., ET, on the next
business day. Conforming draws for purchase price received by the Bank at or
before 11:30 a.m., ET, on a business day will be honored by 2:30 p.m., ET, on
the same business day.
Reinstatement of Interest Draws
Draws made under the letter of credit for interest shall be
automatically reinstated at the opening of business on the sixth (6th) calendar
day following the date on which the Bank honor's an interest drawing unless the
trustee receives written notice prior to close of business on the fifth (5th)
calendar day from the Bank that an event of default has occurred and directing
either a mandatory tender or an acceleration of the Bonds. If directed to cause
a mandatory tender of the Bonds, the trustee shall cause a mandatory tender of
the Bonds on the second (2nd) day (or next succeeding business day) following
receipt of such notice by the trustee from the Bank that the interest portion of
the letter of credit will not be reinstated. If directed to accelerate the
Bonds, the trustee shall immediately declare the Bonds due and payable. Interest
will cease to accrue upon declaration of acceleration.
Reimbursement Agreement Defaults
Pursuant to the Indenture, the Bank may, at its option, deliver written notice
to the trustee stating that an event of default under the reimbursement
agreement has occurred and direct the trustee to cause either a mandatory tender
or an acceleration of the Bonds. If directed to cause a mandatory tender of the
Bonds, the trustee shall cause a mandatory tender of the Bonds on the tenth
(10th) calendar day (or next preceding business day) following the receipt by
the trustee of such notice of an event of default under the reimbursement
agreement. If directed to accelerate the Bonds, the trustee shall
immediately declare the Bonds due and payable. Interest will cease to
accrue upon declaration of acceleration.
Expiration / Termination of the Letters Of Credit
Each letter of credit expires at the close of business on the earliest of (i)
February 28, 2014 (the stated expiration date); (ii) the date the Bank receives
notice from the trustee stating either that (a) all outstanding bonds have been
paid or deemed to have been paid in full, or (b) a substitute letter of credit
has been accepted; (iii) the earlier of (a) the first business day following the
conversion of bonds to an interest rate mode other than Weekly, or (b) the date
which the Bank honors a draw on the letter of credit in connection with such
conversion date; (iv) the earlier of (a) the eleventh (11th) business day
following the trustee receipt of notice from the Bank of an event of default
under the reimbursement agreement directing either acceleration or a mandatory
tender of the Bonds, or (b) the date, following receipt of such notice, that the
trustee draws upon the letter of credit in the amount required and the Bank
honors such drawing; or, (v) the earlier of (a) the date thirteen (13) calendar
months following trustee's receipt from the Bank that a Material Adverse Change
(with respect to the Borrower) occurred under the reimbursement agreement, or
(b) the date, following receipt of such notice, that the trustee draws upon the
letter of credit in the amount required and the Bank honors such drawing.
Termination provision (v) results in a mandatory tender five (5) business days
prior to such termination date.
Substitution of the letters of credit are permitted. The Bonds are subject to
mandatory tender on the substitution date. The trustee shall not surrender the
existing letter of credit for cancellation until all required draws have been
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 and
remarketing agent by 4:00 p.m. ET at least seven (7) days prior to the purchase
date. Bonds so tendered will be purchased from their bondholders on the tender
date at a purchase price of par plus interest accrued to the tender date.
The Bonds are subject to mandatory tender on (i) each interest rate
mode conversion date, (ii) the business day that is immediately prior to the
fifth (5th) calendar day preceding any expiration, termination, reduction, or
modification of the letter of credit, (iii) on the substitution date of the
letter of credit, (iv) on the tenth (10th) calendar day (or next preceding
business day) following trustee's receipt of notice from the Bank of an event of
default under the reimbursement agreement, or (v) on the second (2nd) calendar
day (or next succeeding business day) following trustee's receipt of notice from
the Bank that the interest portion of the letter of credit will not be
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 long-term
OSO rating on the Bank was upgraded or the long-term underlying rating was
Short-Term: Not Applicable.
What Could Change the Rating-Down
Long-Term: The long-term rating on the Bonds could be lowered if the long-term
OSO rating on the Bank or the long-term underlying rating was downgraded or if
the default dependence increased.
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 Trust Company, N.A.
Underwriter/Remarketing Agent: Citigroup Global Markets, 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 September 2010 and Moody's
Rating Methodology for Letter of Credit Supported Transactions published in
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 maintaining a credit
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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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 Aa2/VMIG 1 LETTER OF CREDIT-BACKED RATING TO WASHINGTON HEALTH CARE FACILITIES AUTHORITY REVENUE BONDS (SWEDISH HEALTH SERVICES), SERIES 2011B AND 2011C
Moody's Investors Service
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New York, NY 10007