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Rating Update:

MOODY'S CONFIRMS THE Aa1 LONG-TERM LETTER OF CREDIT BACKED RATING OF THE AARP TAXABLE VARIABLE RATE DEMAND NOTES, SERIES 2001; AFFIRMS THE SHORT-TERM VMIG 1 RATING

15 Sep 2011

$50 MILLION OF DEBT AFFECTED. RATING BASED ON JOINT SUPPORT FROM JPMORGAN CHASE BANK, N.A. AS LETTER OF CREDIT PROVIDER AND AARP

Fully Supported
DC

Opinion

NEW YORK, Sep 15, 2011 -- Moody's Investors Service has confirmed the Aa1 long-term letter of credit backed rating of the AARP Taxable Variable Rate Demand Notes, Series 2001 (the "Notes") and affirmed the VMIG 1 short-term rating in conjunction with the substitution of the current letter of credit securing the Notes provided by Bank of America, N.A. with a letter of credit to be provided for the Notes by JPMorgan Chase Bank, N.A. (the "Bank").

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 the Bank as provider of the letter of credit supporting the Notes, the underlying rating assigned to the Notes, 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 Notes. The short term rating is based on the short term rating of the Bank. JPMorgan Chase Bank, N.A.'s long-term other senior obligations ("OSO") are currently rated Aa1. Moody's currently rates the Bank's short-term OSO Prime-1. Moody's currently maintains an underlying rating of Aa3 on the Notes.

Since non-payment on the Bonds would occur only if both the Bank providing the letter of credit and AARP 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 support provider and the issuer. Moody's has determined that there is a low level of default dependence between the Bank and AARP. As a result, the joint probability of default for the Bank and AARP results in a credit risk consistent with a JDA rating of Aa1.

DETAILED CREDIT DISCUSSION

Interest Rate Modes And Payment

The Notes bear interest in the weekly rate mode and interest will continue to be paid on the first business day of each month. The bond indenture does not provide for conversion of the Notes to any other rate modes. Accordingly, Moody's JDA and short-term ratings only apply to Notes bearing interest in the weekly rate mode.

Additional Notes

The issuance of additional Notes is not permitted under the bond indenture.

Flow Of Funds

The trustee is instructed to draw under the letter of credit in accordance with its terms to receive sufficient funds to pay principal and interest by 1:45 p.m. on the payment date. In the event the Bank fails to honor a conforming draw under the letter of credit for principal of or interest on the Notes, AARP is required to pay, or cause to be paid, the principal and accrued interest thereon of every Note. The trustee is also instructed to draw under the letter of credit in accordance with its terms to receive in immediately available funds by 1:45 p.m. on each purchase date the purchase price to the extent remarketing proceeds are insufficient. Notes 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 Bank stating that the letter of credit has been reinstated in the amount drawn for the purchase of such Notes. (All times refer to Eastern Standard Time).

Letter Of Credit

The letter of credit is sized for full principal plus thirty-five days of interest at the maximum rate applicable to the Notes (12%) and provides sufficient coverage for payment of principal, interest and purchase price on the notes. The letter of credit provided by the Bank is to be 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 12:30 p.m. on the next business day. Conforming draws for purchase price received by the Bank at or before 9:30 a.m. on a business day will be honored by 12:30 p.m. on the same business day. (All times refer to Central Standard Time).

Reinstatement Of Interest Draws

Draws made under the letter of credit for interest shall be reinstated automatically upon payment of the Bank of each such draw.

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 redemption of the Notes. If the Bank directs to the trustee to accelerate the Notes, the trustee shall declare all Bonds then outstanding to be due and payable immediately, and upon such declaration, all principal and interest accrued thereon shall become and be immediately due and payable. The trustee shall immediately draw on the letter of credit, and interest shall cease to accrue upon such declaration. If the Bank directs the trustee to cause a mandatory redemption, the trustee shall do so on the earliest date for which notice of mandatory redemption can be given upon receipt of the Bank's notice of an event of default under the reimbursement agreement. Such notice shall be sent to each holder at least 30 but not more than 60 days prior to each redemption. Upon request by the Bank, the trustee shall draw on the letter of credit to purchase the Notes in lieu of redemption or acceleration on the date of said redemption or acceleration. The letter of credit terminates on the fourteenth calendar day 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 accelerate the Notes.

Expiration/Termination Of The Letter Of Credit

The letter of credit will terminate at the close of business upon the earliest to occur of: (i) September 15, 2016, the stated expiration date of the letter of credit; (ii) the date which is fifteen days following the Bank's receipt of notice from the trustee stating that (a) no Notes remain outstanding, (b) all required drawings have been made and honored under the letter of credit, or (c) a substitute letter of credit has been issued to replace the existing letter of credit; (iii) the date on which an acceleration drawing is honored by the Bank, or (iv) the date which is fourteen 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 accelerate the Notes.

Substitution

Substitution of the letter of credit is permitted under the bond indenture. The Notes will be subject to mandatory tender on the effective date of any such substitution. The trustee is instructed to draw under the existing letter of credit, rather than the substitute letter of credit, on the substitution date. The trustee is required to wait until all draws required to be made under the existing letter of credit have been honored before surrendering the existing letter of credit to the Bank.

Optional Tenders

Bondholders may, at their option, tender their Notes on any business day upon the delivery of written notice delivered by 11:00 a.m. at least 7 calendar days or 5 business days (whichever is earlier), but not more than 30 calendar days, prior to such tender date. (All times refer to Eastern Standard Time).

Mandatory Tenders

The Notes are subject to mandatory tender on the following dates: (i) on the effective date of a substitute letter of credit; and, (ii) on any interest payment date selected by AARP in a notice to the trustee delivered at least thirty days prior to such date (provided that if such day is not a business day, then on the next succeeding business day).

Mandatory Redemptions

The Notes are subject to mandatory redemption on the following dates: (i) the earliest date for which notice can be given upon receipt by the trustee of notice from the Bank specifying the occurrence of an event of default under the reimbursement agreement directing the trustee to cause a mandatory redemption of the Notes (provided that each notice shall be sent at least thirty days but not more than sixty days prior to each redemption); and, (ii) the interest payment date which next precedes by at least fourteen days the stated expiration or termination date of the letter of credit.

WHAT COULD CHANGE THE RATING-UP

Long-Term: The long-term rating on the Notes could be raised if the Bank's long-term OSO rating is upgraded or the underlying rating on the Notes is upgraded.

Short-Term: Not Applicable.

WHAT COULD CHANGE THE RATING-DOWN

Long-Term: The long-term rating on the Notes could be lowered if the Bank's long-term OSO rating or the underlying rating on the Notes is downgraded or if the default dependence increases.

Short-Term: The short-term rating on the Notes could be lowered if the Bank's short-term OSO rating isdowngraded.

Key Contacts:

Trustee: U.S. Bank National Association

Remarketing Agent: J.P. Morgan Securities, LLC

The last rating action on the Notes took place on June 3, 2011 when the long-term rating was placed on review for downgrade.

PRINCIPAL METHODOLOGIES USED

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.

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 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 Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's 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 www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Analysts

Ian Rogow
Analyst
Public Finance Group
Moody's Investors Service

Thomas Jacobs
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 CONFIRMS THE Aa1 LONG-TERM LETTER OF CREDIT BACKED RATING OF THE AARP TAXABLE VARIABLE RATE DEMAND NOTES, SERIES 2001; AFFIRMS THE SHORT-TERM VMIG 1 RATING
No Related Data.
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