$6.5 MILLION OF DEBT AFFECTED. SUBSTITUTE LETTER OF CREDIT IS PROVIDED BY PNC BANK, NATIONAL ASSOCIATION
Monmouth (City of) IL
NEW YORK, Oct 1, 2010 -- Moody's Investors Service has revised to A1 (on watch for possible
downgrade)/VMIG 1 from A1/VMIG 1 rating of City of Monmouth, Illinois Variable
Rate Demand Industrial Project Revenue Bonds (Monmouth College Project), Series
The rating revision is in conjunction with the substitution of the
current letter of credit supporting the Bonds provided by the Allied Irish
Banks, p.l.c. with an alternate irrevocable direct-pay letter of credit (LOC)
provided by PNC Bank, National Association (Bank). The new letter of credit will
take effect on October 1, 2010 with the stated expiration date scheduled for
October 1, 2015.
The Bank is rated A1 for long-term other senior obligations (OSO) and Prime-1
for short-term OSO. The long-term rating of the Bank is on watch for downgrade.
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 business day of each month. The trust indenture permits
conversion of the Bonds, in whole, to bear interest on a monthly, three-month,
six-month, one-year, five-year, or fixed rate basis. The Bonds will be subject
to mandatory purchase upon each conversion. In connection with such mandatory
tender of the Bonds on the conversion date, holders may elect to retain their
Bonds by delivering to the Trustee a written notice no later than 11:00
a.m., New York City time, on the fifth (5th) business day prior to
such conversion, stating that the holder realizes that any rating assigned to
the Bonds may be withdrawn or lowered. Our rating applies to Bonds bearing
interest in a weekly interest rate mode only.
Flow of Funds
The trustee is instructed to draw under the LOC by 11:00 a.m., New York time, on
a business day next preceding any date on which payments of principal and
interest are due on the Bonds. The trustee is also instructed to draw on the LOC
by 11:00 a.m., New York 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 written 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 new LOC is sized for full principal plus forty five (45) days of interest at
the maximum rate applicable to the Bonds (10%) and will provide coverage for the
Bonds while they bear interest in a weekly rate mode only. The letter of credit
provided by the Bank is subject to the International Standby Practices,
International Chamber of Commerce, Publication No. 590 (ISP98).
Draws on the Letter of Credit
Conforming draws for the payment of principal and interest received by the Bank
at or prior to 11:00 a.m., New York City time, on a business day, will be
honored by 3:00 p.m. New York City time, on the same business day. Conforming
draws for the payment of purchase price received by the Bank at or prior to
11:00 a.m., New York City time, on a business day, will be honored by 2:00
p.m. New York City time, on the same business day
Reinstatement of Interest Draws
Draws made under the letter of credit for interest shall be
automatically reinstated on the seventh (7th) calendar day from the date of such
drawing unless the trustee shall have received written notice from the Bank
prior to the close of business on the sixth (6th) calendar day following
the date of any interest drawing, stating that the Bank has not been reimbursed
in full or any other event of default under the reimbursement agreement has
occurred and as a consequence the interest portion of the LOC will not be
reinstated. Upon receipt of such notice the trustee shall declare the Bonds
immediately due and payable and interest shall cease to accrue upon such
Reimbursement, Credit and Security Agreement Defaults
The Bank may, at its option, send written notice to the trustee that an event of
default under the letter of credit reimbursement agreement has occurred. Upon
receipt of such notice the trustee shall declare the Bonds immediately due and
payable and interest shall cease to accrue upon such declaration.
Trust 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 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 Letter of Credit
The letter of credit will terminate upon the earliest of: (i) October 1, 2015,
stated expiration date; (ii) the date which is fifteen (15) days following the
conversion of all the Bonds to an interest rate mode other than weekly; (iii)
the date which is twenty (20) days following receipt by the trustee of a written
notice from the Bank, notifying the trustee that an event of default under the
reimbursement agreement has occurred; (iv) the date with is fifteen (15) days
following receipt by the Bank of a certificate from the trustee certifying and
confirming that (A) there remain no outstanding bonds within the meaning of the
indenture, (B) all drawings required to be made under the indenture and
available under the LOC have been made and honored, or (C) an effective
alternate credit facility has been issued to replace the LOC pursuant to the
indenture, and, accordingly, the LOC shall be terminated; or (v) the date on
which an acceleration drawing is honored by the bank.
Substitution of the LOC is permitted and the Bonds will be subject to mandatory
purchase on the substitution date. In connection with such mandatory tender of
the Bonds on the substation date, holders may elect to retain their Bonds by
delivering to the Trustee a written notice no later than 11:00 a.m., New York
City time, on the eight business day prior to such substitution, stating that
the holder acknowledges that any rating assigned to the Bonds may be withdrawn
Bondholders may optionally tender their Bonds, while in the weekly rate mode, on
any business day with seven days prior written notice to the trustee.
The Bonds are subject to mandatory tender on the following dates: (i) each
interest rate conversion date; (ii) the effective date of any substitute letter
of credit; or (iii) the interest payment date which next precedes the LOC
termination date by at least two (2) business days.
What Could Change the Rating - Up
Long Term: The long-term rating on the Bonds would be raised if the long-term
other senior obligation (OSO) rating on the Bank was upgraded.
Short-Term: Not Applicable
What Could Change the Rating - Down
Long-Term: The long-term rating on the bonds would be lowered if the long-term
OSO rating on the Bank was downgraded.
Short-Term: The short-term rating on the bonds would be lowered if the
short-term OSO rating on the Bank was downgraded.
The principal methodology used in rating this issue was Moody's
Rating Methodology for Letter of Credit Supported Transactions, published in
October 2005 and available on www.moodys.com in the Rating Methodologies
sub-directory under the Research & Ratings tab. Other methodologies and
factors that may have been considered in the process of rating this issue can
also be found in the Rating Methodologies sub-directory on Moody's website.
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
Michael J. Loughlin
Senior Credit Officer
Public Finance Group
Moody's Investors Service
Journalists: (212) 553-0376
Research Clients: (212) 553-1653
MOODY'S REVISES TO A1 (ON WATCH FOR POSSIBLE DOWNGRADE)/VMIG 1 FROM A1/VMIG 1 LETTER OF CREDIT-BACKED RATING OF CITY OF MONMOUTH, IL VARIABLE RATE DEMAND INDUSTRIAL PROJECT REVENUE BONDS, SERIES 2005 (MONMOUTH COLLEGE PROJECT)
Moody's Investors Service
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New York, NY 10007