$49.61 MILLION OF DEBT AFFECTED. SUBSTITUTE LETTER OF CREDIT PROVIDED BY JPMORGAN CHASE BANK, N.A.
Massachusetts Development Finance Agency
NEW YORK, Sep 1, 2011 -- Moody's Investors Service has upgraded to Aa1 from Aa2 the long term letter of
credit backed rating assigned to the Massachusetts Development Finance Agency
Variable Rate Demand Variable Mode Revenue Bonds (Simmons College Issue, Series
G) (the "Bonds") in conjunction with the substitution of the current letter of
credit securing the Bonds provided by TD Bank, N.A. with a new direct-pay
letter of credit ("LOC") provided by JPMorgan Chase Bank, N.A. (the "Bank")
effective September 1, 2011.
SUMMARY RATING RATIONALE
The rating is based upon (i) a direct-pay letter of credit ("LOC") provided by
the Bank, (ii) the structure and legal protections of the transaction, which
ensures timely payment of debt service and purchase price to bondholders; and
(iii) Moody's evaluation of the credit quality of the bank issuing the letter of
Moody's currently rates the Bank Aa1 for long-term other senior obligations
("OSO") and P-1 for short-term OSO.
DETAILED CREDIT DISCUSSION
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 the
conversion of the interest rate of the Bonds, in whole, to a fixed or SAVRS
mode. The Bonds will be subject to mandatory tender upon conversion of interest
rate mode. Moody's rating applies to the Bonds only while bearing interest in
the weekly interest rate.
The trust indenture does not allow the issuance of additional Series G Bonds.
Flow of Funds
The trustee is instructed to draw under the LOC by 10:00 a.m., Eastern time, on
the business day prior to each principal and/or interest payment date in order
to receive timely payment. The trustee is also instructed to draw under the LOC
by 10:00 a.m., Eastern time, on each purchase date based on remarketing
Bonds that 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 for the full amount of
the purchase price drawn for such Bonds.
Direct Pay Letter of Credit
The LOC provided by the Bank is sized for the full principal amount plus 45 days
of interest at the maximum interest rate of 12%. The LOC provides sufficient
coverage for the Bonds while they bear interest in the weekly rate mode.
Draws on Letter of Credit
Conforming draws under the LOC for principal and interest received by the Bank
at or prior to 4:00 p.m., Eastern time, on a business day, will be honored by
1:00 p.m., Eastern time, on the following business day. Conforming draws for
purchase price received by the Bank by 10:00 a.m., Eastern time, on a business
day, will be honored by the Bank by 2:00 p.m., Eastern time, on the
same business day.
Reinstatement of Interest Draws
Draws made under the LOC for interest shall be automatically reinstated on the
11th day following the Bank's honoring any such interest drawing unless the
trustee receives notice from the Bank of an event of default under the
reimbursement agreement and the non-reinstatement of the LOC by 12:00 p.m.,
Eastern Time, on the tenth (10th) day following such a drawing. Upon receipt of
such notice, the trustee is directed to immediately accelerate the maturity of
the Bonds. Interest ceases to accrue at such declaration.
Substitution of the LOC is permitted and requires a mandatory tender of the
Bonds on the date the substitute LOC will go into effect. On such mandatory
tender date, the trustee shall draw under the existing LOC for full purchase
price of the corresponding Bonds, to the extent remarketing proceeds are not
available, and shall not surrender the existing LOC to the Bank until after all
draws have been honored.
Reimbursement Agreement Defaults
The Bank may deliver written notice to the trustee stating that an event of
default under the reimbursement agreement has occurred and is continuing and
directing the acceleration of the Bonds. The trustee shall immediately
accelerate the maturity of the Bonds and draw on the LOC. Interest will cease to
accrue on the date of such declaration
Expiration / Termination of the Letter of Credit
The LOC expires upon the earliest to occur of: (1) the Bank's honoring of the
final drawing under the LOC; (2) on the Bank's receipt of the trustee's
certification that (a) no Bonds remain outstanding, or (b) a substitute LOC has
gone into effect, or (c) on the business day following the Bank's receipt of
notification from the trustee that all the Bonds have been converted to a rate
mode other than weekly; or (4) September 1, 2016, the stated termination date.
While the Bonds are in the weekly rate mode, bondholders may optionally tender
their Bonds on any business day, by providing written notice to the trustee at
least seven days in advance. Bondholders tendering their Bonds will receive
purchase price equal to the par amount of the Bonds tendered plus accrued
interest to the tender date.
The Bonds are subject to mandatory tender on the following dates: (1) on any
interest rate conversion date; (2) five business days prior to the expiration
date of the LOC; or (3) on the substitution date of the LOC.
The Bonds are subject to mandatory sinking fund redemptions.
WHAT COULD CHANGE THE RATING-UP
Long - Term: The long-term ratings on the Bonds could be raised if the
long-term rating of the Bank was upgraded.
Short-Term: not applicable
WHAT COULD CHANGE THE RATING - DOWN
Long-Term: The long-term ratings on the Bonds could be lowered if the long-term
rating of the Bank was downgraded.
Short-Term: The short-term rating on the Bonds could be lowered if the
short-term rating of the Bank was downgraded.
Trustee: The Bank of New York Mellon Trust Company, N.A.
Remarketing Agent: Barclays Capital
The last rating action on the Bonds took place on April 1, 2008 when the long
term rating was upgraded to Aa2 from A3.
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. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology .
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
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involved in the ratings, and public information.
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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 UPGRADES TO Aa1 THE LONG TERM LETTER OF CREDIT BACKED RATING OF THE MASSACHUSETTS DEVELOPMENT FINANCE AGENCY VARIABLE RATE DEMAND VARIABLE MODE REVENUE BONDS (SIMMONS COLLEGE ISSUE, SERIES G); SHORT TERM VMIG 1 RATINGS AFFIRMED
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