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Rating Update:

MOODY'S DOWNGRADES TO Aa3 FROM Aa1 LOC-BACKED LONG-TERM RATING AND AFFIRMS VMIG 1 SHORT-TERM RATING OF WISCONSIN HEALTH AND EDUCATIONAL AUTHORITY, WHEATON FRANCISCAN HEALTHCARE SYSTEM VARIABLE RATE DEMAND REVENUE BONDS, SERIES 2007

08 Nov 2010

$64.405 MILLION IN DEBT AFFECTED. LONG-TERM JDA RATING IS BASED ON LONG-TERM RATINGS OF PNC BANK, N.A. AND WHEATON FRANCISCAN HEALTHCARE SYSTEM

Wisconsin Health & Educational Fac. Auth.
Fully Supported
WI

Opinion

NEW YORK, Nov 8, 2010 -- Moody's Investors Service has downgraded to Aa3 from Aa1 long-term rating and affirmed VMIG 1 short-term rating of Wisconsin Health and Educational Facilities Authority, Wheaton Franciscan Healthcare System, Variable Rate Demand Revenue Bonds, Series 2007 (the Bonds) in conjunction with the substitution of the current letter of credit supporting the Bonds provided by JPMorgan Chase Bank, N.A. with an alternate irrevocable direct-pay letter of credit (LOC) provided by PNC Bank, N.A. The new LOC becomes effective on November 8, 2010.

RATING 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; 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 rating of the Bonds. The short-term rating of the Bonds is based upon the short-term rating of the Bank as provider of the letter of credit.

PNC Bank, N.A. (Bank) is currently rated A2 for long-term other senior obligations (OSO) and Prime-1 for short-term OSO. Moody's maintains Baa2 underlying rating on the Bonds.

Since a loss to investors would occur if both the Bank and Wheaton Franciscan Healthcare System (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 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 Aa3 for the Bonds.

Interest Rate Modes and Payment

The Bonds will continue to bear interest in a weekly rate mode and interest will be paid on the first Wednesday of each month. The bond trust indenture permits conversion of the Bonds, in whole, to a daily, short-term or long-term interest rate period and upon any conversion the Bonds will be subject to mandatory purchase. The JDA and short-term ratings apply to the Bonds bearing interest in a weekly or daily interest rate mode. If the Bonds are converted to bear interest in a daily mode, interest will be paid on the fifth (5th) business day of each calendar month.

Additional Bonds

No additional bonds shall be issued under the bond trust indenture.

Flow of Funds

The trustee is instructed to draw under the LOC on the business day prior to any principal and interest payment date in order to receive moneys on the next business day in amount sufficient for the payment in full of the principal and interest due on the Bonds. If the Bank fails to honor a draw under the LOC, the trustee shall immediately notify the Borrower and demand payment of such amount. The trustee is also instructed to draw under the LOC on each purchase date in accordance with the LOC 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 Bank stating that the LOC has been reinstated in the amount of the purchase price drawn for such Bonds.

Letter of Credit

The LOC is sized for full principal plus 58 days of interest at the maximum rate applicable to the Bonds (10%) and will provide coverage for the Bonds while they bear interest in the weekly or daily interest rate mode.

Draws on the Letter of Credit

Conforming draws for principal and interest presented to the Bank at or before 2:30 p.m., Pittsburgh time, on a business day, will be honored by the Bank no later than 11:00 a.m., Pittsburgh time, on the next business day. Conforming draws for purchase price presented to the Bank at or before 12:45 p.m., Pittsburgh time, on a business day, will be honored by such Bank no later than 2:45 p.m., Pittsburgh time, on such business day.

Substitution of the Letter of Credit

The Bonds will be subject to mandatory tender on the substitution date of the LOC. The existing LOC will not be surrendered to the Bank for cancellation until after such tender draw is honored.

Reinstatement of Interest Draws

Draws made under the LOC for interest shall be automatically reinstated at the opening of business on the eleventh (11th) calendar day after honoring of such drawing, unless the trustee receives from the Bank a notice not later than the close of business on the tenth (10th) calendar day after honoring of such drawing that the Bank is not reinstating due to the Borrower's failure to reimburse the Bank for such interest drawing, or that en event of default under the reimbursement agreement has occurred and in either case, directing either a mandatory tender or acceleration of the Bonds. Upon receipt of such notice with direction to accelerate the trustee shall immediately declare the principal of and accrued interest on the Bonds due and payable and interest on such Bonds shall cease to accrue on the day of declaration of acceleration. Upon receipt of a notice with direction to cause a mandatory tender, the Bonds shall be subject to mandatory purchase on the fifth (5th) day following trustee's receipt of such notice.

Reimbursement Agreement Defaults

The Bank may, at its option, send written notice to the trustee that an event of default under the reimbursement agreement has occurred and direct the trustee to cause an acceleration or mandatory tender of the Bonds. Upon the Bank's direction to accelerate payment of the Bonds, the trustee shall declare the Bonds immediately due and payable and interest shall cease to accrue upon such declaration. Upon the Bank's direction to cause a mandatory tender, the Bonds will be subject to mandatory purchase on the fifth (5th) day following trustee's receipt of such notice.

Bond Indenture Events of Default Related to Payment

Upon a failure to pay when due the principal or interest or the purchase price on the Bonds, the trustee may, and at the written request of the Bank or the holders of majority in principal amount of the outstanding Bonds shall declare the principal of and accrued interest on the Bonds due and payable and interest on such Bonds will cease to accrue on the day of declaration of acceleration.

Expiration / Termination of the Letter of Credit

The LOC shall terminate upon the earliest to occur of: (i) November 8, 2013, the stated expiration date; (ii) the fifth (5th) business day following Bank's receipt from the trustee of a certificate stating that (A) no Bonds remain outstanding, (B) all drawings have been made and honored, (C) all Bonds were converted to bear interest at a rate mode other than weekly or daily, or (D) an alternate LOC has been delivered; (iii) the day which is twenty-five (25) days after trustee's receipt of a notice from the Bank stating that an event of default under the reimbursement agreement has occurred and directing either a mandatory tender or an acceleration of the Bonds, (iv) the date an acceleration drawing is honored by the Bank.

Optional Tenders

Bondholders may optionally tender their Bonds on any business day during the weekly rate mode with seven (7) days prior written notice to the tender agent. While in the daily rate mode, bondholders may optionally tender their bonds on any business day by delivering of the notice to the tender agent by 11:00 a.m. Eastern Standard time.

Mandatory Purchases

The Bonds are subject to mandatory tender on the following dates: (i) each interest rate conversion date, (ii) the fifth (5th) day prior to the expiration date of the letter of credit, (iii) the date of the replacement of the LOC; (iv) the fifth (5th) day following trustee's receipt of a notice from the Bank stating the occurrence of an event of default under the reimbursement agreement and directing the mandatory purchase of the Bonds.

What Could Change the Rating-Up

Long-Term: the long-term rating on the Bonds could be upgraded if the long-term OSO rating of the Bank or the long-term rating of the Borrower was upgraded.

Short-Term: N/A

What Could Change the Rating-Down

Long-Term: the long-term rating on the Bonds could be lowered if the long term OSO rating of the 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 Bank and the Borrower.

Short-Term: the short-term rating on the Bonds could be lowered if the short-term OSO rating, on the Bank was downgraded.

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 August 2005.

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 maintaining 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

Robert Azrin
Senior Credit Officer
Public Finance Group
Moody's Investors Service

Contacts

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


Moody's Investors Service
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New York, NY 10007
USA

MOODY'S DOWNGRADES TO Aa3 FROM Aa1 LOC-BACKED LONG-TERM RATING AND AFFIRMS VMIG 1 SHORT-TERM RATING OF WISCONSIN HEALTH AND EDUCATIONAL AUTHORITY, WHEATON FRANCISCAN HEALTHCARE SYSTEM VARIABLE RATE DEMAND REVENUE BONDS, SERIES 2007
No Related Data.
© 2019 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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