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17 Mar 2011
Approximately $28.9 Million of Structured Securities Affected
New York, March 17, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of three
credit tenant lease (CTL) transactions supported by Sparks Regional Medical
Center Lease Certificates of Participation Series 2002 as follows:
Term Certificates due June 15, 2012, $4,185,000;
Affirmed at B1 (sf); previously on Mar 31, 2010 Upgraded to
Term Certificates due June 15, 2017, $14,570,000;
Affirmed at B1 (sf); previously on Mar 31, 2010 Upgraded to
Term Certificates due June 15, 2022, $10,175,000;
Affirmed at B2 (sf); previously on Mar 31, 2010 Upgraded to
The ratings of the certificates are affirmed at B1 (sf) based on the current
rating of Health Management Associates, Inc. (HMA; long
term issuer rating B1; positive outlook), which acquired substantially
all of the assets of Sparks Regional Medical Center (Sparks), the
original lessee of the facilities supporting the transaction with consideration
given to the source of funds (lease payments versus refinance proceeds)
for the repayment of the three certificates. The (sf) indicator
is being added to these ratings pursuant to Moody's practice of
differentiating ratings assigned to structured finance obligations.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these
expectations. Performance that falls outside an acceptable range
of the key parameters may indicate that the collateral's credit
quality is stronger or weaker than Moody's had anticipated during
the current review. Even so, deviation from the expected
range will not necessarily result in a rating action. There may
be mitigating or offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to amortization
and loan payoffs or a decline in subordination due to realized losses.
The principal methodology used in this rating was "CMBS: Moody's
Approach to Rating Credit Tenant Lease (CTL) Backed Transactions"
published in October 1998. Under Moody's CTL approach, the
rating of a transaction's certificates is primarily based on the senior
unsecured debt rating (or the corporate family rating) of the tenant,
usually an investment grade rated company, leasing the real estate
collateral supporting the bonds. This tenant's credit rating is
the key factor in determining the probability of default on the underlying
lease. The lease generally is "bondable", which means it
is an absolute net lease, yielding fixed rent paid to the trust
through a lock-box, sufficient under all circumstances to
pay in full all interest and principal of the loan. The leased
property should be owned by a bankruptcy-remote, special
purpose borrower, which grants a first lien mortgage and assignment
of rents to the securitization trust. The dark value of the collateral,
which assumes the property is vacant or "dark", is then examined;
the dark value must be sufficient, assuming a bankruptcy of the
tenant and rejection of the lease, to support the expected loss
consistent with the certificates' rating. Moody's may make adjustments
reflecting the possibility of lease affirmations by the tenant and for
the landlord's claim for lease rejection damages in bankruptcy.
Moody's also may give credit for some amortization of the debt,
depending upon the rating of the credit tenant. In addition,
Moody's considers the overall structure and legal integrity of the transaction.
The certificates' rating may change as the senior unsecured debt rating
(or the corporate family rating) of the tenant changes. Other methodologies
and factors that may have been considered in the process of rating this
issuer can also be found on Moody's website. Moody's ratings
are determined by a committee process that considers both quantitative
and qualitative factors. Therefore, the rating outcome may
differ from the model output.
The rating action is a result of Moody's on-going surveillance
of commercial mortgage backed securities (CMBS) transactions. Moody's
prior full review is summarized in a press release dated March 31,
2010. Please see the ratings tab on the issuer / entity page on
moodys.com for the last rating action and the ratings history.
As of March 8, 2011, the transaction's aggregate Certificate
balance was $28.9 million. The transaction currently
consists of three Certificates which are due June 15, 2012,
June 15, 2017, and June 15, 2022, respectively.
The Certificates evidence proportionate undivided interests in 19 medical
facilities which were originally leased to Sparks. On December
1, 2009, HMA acquired substantially all of Sparks assets,
including the assignment of Sparks' interest under the lease supporting
this transaction. The lease expires on June 30, 2017,
subject to a five year extension option.
The scheduled lease payments are sufficient to completely pay off the
Certificates due June 2012 and June 2017. Because there still will
be an outstanding balance for the Certificates due June 2022 at the end
of the tenant's initial lease term, the transaction was structured
with a residual value insurance policy issued by R.V.I.
America Insurance Company (RVI). The policy is for $10,750,000,
which is the principal amount of the Certificates due June 2022.
On February 4, 2009, Moody's downgraded RVI's financial strength
rating to Baa3 from A3 and subsequently withdrew the rating. The
rating on the Certificates due June 2022 is notched down from HMA's rating
due to the size of the loan balance at maturity relative to the value
of the collateral assuming the existing tenant is no longer in occupancy
(the "dark" value).
Structured Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Affirms the Ratings of Three CTL Classes of Sparks Regional Medical Center Lease, Series 2002
250 Greenwich Street
New York, NY 10007
No Related Data.
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