$25 MILLION OF DEBT AFFECTED. RATING IS BASED ON THE JOINT SUPPORT FROM JPMORGAN CHASE BANK, NATIONAL ASSOCIATION AS LETTER OF CREDIT PROVIDER AND YMCA OF THE GREATER HOUSTON AREA.
Harris County Cult. Educ. Fac. Fin.Corp.,TX
NEW YORK, Apr 20, 2011 -- Moody's Investors Service has upgraded to Aa1/VMIG 1 from Baa1/SG the ratings of
the Harris County Cultural Education Facilities Finance Corporation Revenue
Bonds (Young Men's Christian Association of the Greater Houston Area), Series
2008E (the "Bonds") in conjunction with the substitution of the current letter
of credit securing the Bonds provided by Regions Bank with a letter of credit to
be provided for by JPMorgan Chase Bank, National Association (the "Bank").
Upon the substitution of the letter of credit, currently scheduled for April 20,
2011, the long term rating will be based on joint default analysis ("JDA") and
will reflect 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 assigned to 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 is based on the short term
rating of the Bank. JPMorgan Chase Bank, N.A. is currently rated Aa1
for long-term other senior obligations (OSO) and Prime-1 for short-term OSO.
Moody's currently maintains an underlying rating of Baa2 on the Bonds.
Since a loss to investors would occur only if the Bank providing the letter of
credit and the YMCA of the Greater Houston Area ("YMCA") 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 Bank and the YMCA. Moody's has
determined that there is a high level of default dependence between the Bank
and the YMCA. As a result, the joint probability of default for the Bank and the
YMCA results in a credit risk consistent with a JDA rating of Aa1.
DETAILED CREDIT DISCUSSION
Interest Rate Modes And Payment
The Bonds will continue to bear interest in the daily rate mode and
interest will continue to be paid on the first business day of each month. The
trust indenture permits conversion of the Bonds, in whole, to the weekly rate or
the commercial paper rate mode. Upon the conversion date, the Bonds are subject
to a mandatory tender. Moody's JDA and short-term ratings only apply,
however, to Bonds bearing interest in the weekly rate and daily rate modes. The
weekly rate mode also pays interest on the first business day of each month.
The issuance of additional Bonds is not permitted under the Trust Indenture.
Flow Of Funds
The trustee is instructed to draw on the letter of credit, in accordance with
its terms, in order to receive funds by 10:00 a.m. on the date of any principal
or interest payment date. In the event that the Bank fails to honor any
principal or interest drawing, the trustee shall immediately notify the YMCA
that it should remit money to pay the amounts due prior to 3:00 p.m. on
such date, and the trustee shall then withdraw money from the Debt Service Fund
in an amount sufficient to cure such deficiency. The trustee is also instructed
to draw on the letter of credit shall for purchase price by 12:30 p.m. to the
extent remarketing proceeds received are not sufficient. 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 letter of credit has been reinstated in the amount of
the purchase price drawn for such Bonds (All times refer to local time in effect
in New York, New York).
Letter Of Credit
The letter of credit is sized for full principal plus thirty-five (35) days of
interest at the maximum rate applicable to the Bonds (12%) and will provide
coverage for the Bonds while they bear interest in the weekly or daily interest
rate modes. 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 principal or interest presented to the Bank at or prior to
4:00 p.m. on a business day will be honored by the Bank by 10:00 a.m. on the
next business day. Conforming draws for purchase price presented to the Bank at
or prior to 12:30 p.m. on a business day will be honored by the Bank by 2:30
p.m. on the same business day. (All times refer to local time in effect in New
York, New York).
Reinstatement Of Interest Draws
Draws made under the letters of credit for interest shall be
reinstated automatically upon payment by the Bank of such drawing.
Reimbursement Agreement Defaults
The Bank may, at its option, deliver written notice to the trustee stating that
an event of default under the reimbursement agreement has occurred and direct
the trustee to cause an acceleration of the Bonds. If directed to accelerate the
Bonds, the trustee shall declare the principal of all outstanding Bonds to be
due and payable immediately by notice in writing to Issuer, Borrower, and
holders of the Bonds, and upon such date of declaration, such principal
shall become immediately due and payable. All interest shall cease to accrue on
the date of such declaration. The letter of credit will expires on the
twenty-fifth (25th) day following the trustee's receipt of notice from Bank of
an event of default under the reimbursement agreement directing the trustee to
accelerate the Bonds.
Expiration/Termination Of The Letters Of Credit
The letter of credit expires on the earliest to occur of: (i) payment by the
Bank of a demand following which there will be no outstanding Bonds; (ii)
receipt by the Bank of notice from the trustee specifying either that (a) no
Bonds remain outstanding, or (b) the conditions precedent to the release of the
LOC provided for in the Trust Indenture have been met; (iii) 4:00 p.m. (New
York, New York time) on April 20, 2014, the stated expiration date; or (iv) the
twenty-fifth (25th) 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 Bonds.
The Trust Indenture permits the substitution of the letter of credit. The Bonds
are subject to mandatory tender on or prior to the substitution date of the
letter of credit. The trustee is instructed to draw on the existing letter of
credit and shall not surrender such letter of credit for cancellation unless and
until all draws have been honored.
Bondholders may, at their option, tender their Bonds during the daily rate mode
on any business day with notice delivered to the trustee and remarketing agent
by 11:00 a.m. on the purchase date. Bondholders may also, at their option,
tender their Bonds during the weekly rate mode, on any business day by providing
written notice to the trustee and remarketing agent by 4:00 pm at least seven
(7) days prior to the purchase date. (All times refer to local time in effect in
New York, New York).
The Bonds are subject to mandatory tender on the following dates: (i) on the day
next succeeding the last day of each commercial paper rate period; (ii) on each
conversion date; (iii) on or prior to the date on which the Bank's obligation to
advance funds or purchase Bonds under the letter of credit terminates as stated
in the Bank's notice of termination delivered pursuant to the letter of
credit, which date of termination shall be 20 days (or longer if specified)
after receipt by the trustee of such notice; (iv) on or prior to the
substitution date of the letter of credit; and (v) at least one (1) business
day prior to the expiration date of the letter of credit.
The Bonds are subject to mandatory sinking fund redemptions.
WHAT COULD CHANGE THE RATING-UP
Long-Term: The long-term rating on the Bonds could be raised if the long-term
OSO rating on the Bank was upgraded or the long-term underlying rating on the
Bonds was upgraded or if the default dependence was decreased.
Short-Term: Not Applicable.
WHAT COULD CHANGE THE RATING-DOWN
Long-Term: The long-term rating on the Bonds could be lowered if the long-term
OSO rating on the Bank or the long-term underlying rating on the Bonds was
downgraded or if the default dependence increased.
Short-Term: The short-term rating on the Bonds could be lowered if the
short-term OSO rating on the Bank was downgraded.
Trustee: The Bank of New York Mellon Trust Company, N.A.
Remarketing Agent: J.P. Morgan Securities Inc.
The last rating action on the Bonds took place on November 19, 2010 when they
were placed on watch for downgrade.
PRINCIPAL METHODOLOGY 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
Rating Methodology for Letter of Credit Supported Transactions published in
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
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 UPGRADES TO Aa1/VMIG 1 FROM Baa1/SG THE LETTER OF CREDIT BACKED RATING OF THE HARRIS COUNTY CULTURAL EDUCATION FACILITIES FINANCE CORPORATION REVENUE BONDS (YOUNG MEN'S CHRISTIAN ASSOCIATION OF THE GREATER HOUSTON AREA), SERIES 2008E.
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