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Rating Update:

MOODY'S UPGRADES TO Aa3/VMIG 1 FROM Baa1/VMIG 3 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 2008B.

20 Apr 2011

$50 MILLION OF DEBT AFFECTED. RATING IS BASED ON THE JOINT SUPPORT FROM BANK OF AMERICA, NATIONAL ASSOCIATION AS LETTER OF CREDIT PROVIDER AND YMCA OF THE GREATER HOUSTON AREA.

Harris County Cult. Educ. Fac. Fin.Corp.,TX
Fully Supported
TX

Opinion

NEW YORK, Apr 20, 2011 -- Moody's Investors Service has upgraded to Aa3/VMIG 1 from Baa1/VMIG 3 the ratings of the Harris County Cultural Education Facilities Finance Corporation Revenue Bonds (Young Men's Christian Association of the Greater Houston Area), Series 2008B (the "Bonds") in conjunction with the substitution of the current letter of credit securing the Bonds provided by Allied Irish Banks, p.l.c. with a letter of credit to be provided for by Bank of America, National Association (the "Bank").

RATINGS RATIONALE

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. Bank of America, N.A. is currently rated Aa3 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 Aa3.

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.

Additional Bonds

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 the 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, 2013, 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.

Substitution

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.

Optional Tenders

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).

Mandatory Tenders

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.

Mandatory Redemptions

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 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.

KEY CONTACTS:

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 December 22, 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 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

Ian Rogow
Analyst
Public Finance Group
Moody's Investors Service

Michael J. Loughlin
Senior Credit Officer
Public Finance Group
Moody's Investors Service

Contacts

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


Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

MOODY'S UPGRADES TO Aa3/VMIG 1 FROM Baa1/VMIG 3 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 2008B.
No Related Data.
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