$100,000,000 IN DEBT AFFECTED. RATING BASED ON LETTER OF CREDIT PROVIDED BY BANK OF AMERICA, N.A.
Expected Sale Date
CP backed by LOC
Expected Sale Date
CP backed by LOC
NEW YORK, Jul 21, 2011 -- Moody's Investors Service has assigned a rating of P-1 to the Turlock Irrigation
District Subordinated Revenue Commercial Paper Warrants Series A (Non-AMT) and
Series B (Federally Taxable) (collectively, the Notes). The Notes were
authorized by a Resolution in July, 2011.
SUMMARY RATING RATIONALE
The rating is based upon the letter of credit provided by Bank of America, N.A.
("the Bank"), the structure and legal protections of the transaction which
ensures timely payment of principal and interest to noteholders, and Moody's
evaluation of the credit quality of the Bank. Moody's currently rates Bank of
America, N.A. Aa3 for long-term obligations and Prime-1 for short-term
obligations. The Aa3 long-term rating is on review for downgrade.
DETAILED CREDIT DISCUSSION
The Commercial Paper Notes
Turlock Irrigation District (the District or Issuer) will issue its notes to
finance and refinance various capital improvements for which the District is
responsible. The resolution and the issuing and paying agent agreement authorize
the issuance of up to $100,000,000 of notes. The Series A notes can be issued on
an interest bearing basis only. The Series B notes can be issued at a discount.
Each note will be of a denomination greater than $100,000; will mature no more
than 270 days from issuance, but in no event later than the fifteenth day prior
to the stated expiration date of the letter of credit. Prior to issuance the
issuing and paying agent shall determine that the amount available to be drawn
under the letter of credit to pay principal and interest of maturing notes
equals or exceeds the principal amount of and interest (or stated amount in the
case of notes issued at a discount) on all notes to be outstanding after
such issuance. Notes outstanding are notes issued for which payment has not been
made or for which rollover proceeds are not available for payment of maturing
Letter of Credit
The letter of credit is sized to cover principal and 270 days of interest at the
maximum rate (12%) on the Notes. The aggregate face amount of notes outstanding
shall not exceed the stated amount under the letter of credit. Conforming draws
for payment of principal and interest received by the Bank by 9:30 a.m., Los
Angeles time on a business day will be honored by 12:30 p.m., Los Angeles time
on the same
The issuing and paying agent will draw on the letter of credit to make all
payments of principal and interest when due at maturity. Drawings for payment of
principal and interest of the Notes under the letter of credit will be
automatically reinstated by the Bank upon the Bank's receipt of reimbursement
funds from the issuing and paying agent. The Bank will be reimbursed for each
draw with the proceeds from the sale of rollover notes, or with funds from the
Issuer. The Notes are not subject to redemption prior to maturity.
Reimbursement Agreement Defaults
If there is an event of default under the reimbursement agreement, the Bank may
send to the issuing and paying agent a no-issuance notice or final drawing
notice. Upon receipt of such notices, the issuing and paying agent will cease
issuing additional notes. Upon receipt of a final drawing notice from the Bank,
the issuing and paying agent will draw within two business days for principal of
outstanding Notes and interest that has accrued and will accrue to maturity and
will pay principal and interest on the Notes as they mature. The letter of
credit terminates the earliest of (a) 15 days following the issuing and paying
agent 's receipt of the final draw notice or (b) the honoring of such final draw
in connection with the final draw notice. Upon receipt of only a no-issuance
notice, the issuing and paying agent shall cease issuing notes and draw on the
letter of credit as the Notes mature. In this case the letter of credit will
terminate upon the reduction of the available commitment to zero.
Substitution of the Letter of Credit
The Issuer has the right to provide a substitute letter of credit. Any
substitution of the letter of credit must occur at least one business day prior
to the stated expiration date of the letter of credit and go into effect on a
date on which all notes then outstanding are scheduled to mature, but not until
after all such notes have been paid pursuant to a draw on the prior letter of
Expiration/Termination of the Letter of Credit
The letter of credit provided by the Bank will terminate upon the earliest of:
(i) July 25, 2014, the stated expiration date; (ii) the date on which the Bank
receives written notice from the issuing and paying agent that a substitution of
the letter of credit has occurred; (iii) receipt by the Bank of notice from the
Issuing and paying agent that no notes are outstanding (other than those secured
by a substitute letter of credit) and no more issuance will occur; (iv) the
earliest to occur of: (a) 15 days following the issuing and paying
agent's receipt of final draw notice from the Bank as a result of an event
of default under the reimbursement agreement or (b) the Bank's honoring of the
draw in connection with such notice; and (v) the final draw on the existing
letter of credit has been paid and the stated amount of the letter of credit has
been reduced to zero.
Issuing and Paying Agent: U.S. Bank National Association
WHAT COULD MAKE THE RATING GO UP
WHAT COULD MAKE THE RATING GO DOWN
The rating on the applicable Notes could be lowered if the short-term rating of
the Bank was downgraded.
PRINCIPAL METHODOLOGY USED
The principal methodology used in this rating was Moody's Methodology for Rating
U.S. Public Finance Transactions Based on the Credit Substitution Approach
published in August 2009.
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.
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 P-1 LETTER OF CREDIT BACKED RATING TO TURLOCK IRRIGATION DISTRICT SUBORDINATE REVENUE COMMERCIAL PAPER WARRANTS SERIES A (NON-AMT) AND SERIES B (FEDERALLY TAXABLE)
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