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Rating Action:

Moody's affirms Aa1/VMIG 1 LOC-backed Allen County, OH, Hospital Facilities Revenue Bonds Series 2010C (Catholic Healthcare Partners)

10 Jul 2019

New York, July 10, 2019 -- Moody's Investors Service (Moody's) has affirmed Aa1/VMIG 1 letter of credit backed ratings on the County of Allen, Ohio Adjustable Rate Hospital Facilities Revenue Bonds, Series 2010C (Catholic Healthcare Partners) (the Bonds). The affirmation is in connection with the issuance of a substitute letter of credit (LOC) provided by Bank of Montreal (the Bank) to replace the LOC issued by the MUFG Union Bank, N.A.

RATINGS RATIONALE

Upon the effective date of the substitution, currently scheduled for July 31, 2019, the long-term rating will continue to be based on a joint default analysis (JDA) which reflects Moody's approach to rating jointly supported transactions. JDA incorporates: (i) the long-term Counterparty Risk (CR) Assessment of the Bank, as provider of the LOC, and the underlying rating of the Bonds; (ii) the probability of default in payment by the Bank and Mercy Health (the Borrower), formerly known as Catholic Healthcare Partners; and (iii) the structure and legal protections of the transaction, which provide for timely debt service payments. Moody's current long-term and short-term CR Assessments of the Bank are Aa2(cr) and P-1(cr), respectively. Moody's underlying rating of the Bonds is A2.

Moody's has determined that the joint probability of default between the Bank and the Borrower is low, which results in credit risk consistent with a JDA rating of Aa1 for the Bonds. Moody's assessment of the likelihood of timely payment of purchase price is reflected in the short-term rating of the Bonds, which is based on the short-term CR Assessment of the Bank.

FACTORS THAT COULD LEAD TO AN UPGRADE

• Moody's upgrades the underlying rating of the Bonds or the long-term CR Assessment of the Bank.

• Upgrade of the short-term rating is not applicable.

FACTORS THAT COULD LEAD TO A DOWNGRADE

• Moody's downgrades the underlying rating of the Bonds or the long-term CR Assessment of the Bank.

• Moody's determines that the default dependence between the Borrower and the Bank has increased.

• Moody's downgrades the short-term CR Assessment of the Bank.

The LOC is sized to cover the principal amount of the Bonds plus 46 days of interest at 12%, the maximum rate applicable to the Bonds, calculated based on 365-day year, and provides sufficient coverage for the Bonds in the daily and weekly interest rate modes.

The trustee is instructed to draw on the LOC, in accordance with its terms, in order to receive sufficient funds to make timely payment of principal and/or interest on the Bonds on any interest payment date, redemption date or acceleration date. In the event that the Bank fails to honor a draw under the LOC for any payment of principal and/or interest, the trustee is instructed to use the Borrower's funds on deposit in order to make full and timely payments to the bondholders.

The trustee is also instructed to draw on the LOC by 12:00 p.m., New York City (NYC) time, on each purchase date, for purchase price to the extent remarketing proceeds are insufficient. Bonds which are purchased by the Bank due to a failed remarketing are to be 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 in the amount of the purchase price drawn for such Bonds.

Upon mandatory tender, redemption or acceleration the Bonds are subject to payment funded with a draw on the LOC. Prior to the termination or expiration of the LOC the Bonds are subject to mandatory tender or acceleration as follows.

• Expiration of the LOC: mandatory tender no later than five (5) days prior to the stated expiration date of the LOC; the LOC's stated expiration date is July 31, 2024.

• Substitution of the LOC: mandatory tender no later than five (5) days prior to the substitution date; the LOC terminates on the earlier of (i) the business day following the Bank's receipt of the trustee's certification stating the issuance of a substitute LOC, or (ii) upon the honoring of the mandatory tender draw for such interest rate conversion.

• Interest rate mode conversion: mandatory tender on the first day of each interest rate mode period; the LOC terminates on the business day following conversion of all Bonds to mode other than daily or weekly.

• Event of default under the reimbursement agreement: either mandatory tender or acceleration, in each case, on a business day no later than four (4) days following the trustee's receipt of a notice of event of default under the reimbursement agreement with direction to cause either a mandatory tender or acceleration of the Bonds; the LOC will terminate on the earlier of (i) 15 days following the trustee's receipt of such notice, or (ii) upon the honoring of the draw for acceleration.

Conforming draws on the LOC for principal or interest received by the Bank at or prior to 2:00 p.m., NYC time, on a business day, will be honored by 12:00 p.m., NYC time, on the following business day. Conforming draws for purchase price received by the Bank by 12:00 p.m., NYC time, on a business day, will be honored by 2:30 p.m., NYC time, on the same business day.

Draws made on the LOC for interest shall be automatically and immediately reinstated by the Bank on the 5th calendar day following the honoring of any such interest drawing unless the trustee receives notice from the Bank prior to such time that the Bank has not been reimbursed for such interest drawing or that an event of default has occurred under the reimbursement agreement and, as a result the interest portion of the LOC will not be reinstated. Upon receipt of notice that the interest portion of the LOC will not be reinstated, the Bonds are subject to either mandatory tender or acceleration, in each case, on a business day no later than four (4) days following the trustee's receipt of a notice of non-reinstatement with direction to cause either a mandatory tender or acceleration of the Bonds.

Bondholders may optionally tender Bonds in the daily mode on any business day with notice to the trustee and remarketing agent by 11:00 a.m. on the purchase date. Bondholders may optionally tender Bonds in the weekly mode on any business day with seven days prior notice to the trustee and remarketing agent. Bondholders tendering Bonds will receive purchase price equal to the par amount of the Bonds tendered plus accrued interest to the purchase date.

The Bonds will remain in the daily rate mode with interest paid on the first business day of each month. The interest rate on the Bonds may be converted, in whole or in part, to the weekly, fixed, LIBOR-based, long-term, CP or ARS interest rate modes, and the Bonds will be subject to mandatory tender upon any such conversion. Moody's ratings apply to the Bonds in the daily and weekly rate modes only. In the weekly rate mode the interest will be paid on the first Wednesday of each month.

The principal methodology used in these ratings was Rating Transactions Based on the Credit Substitution Approach: Letter of Credit-backed, Insured and Guaranteed Debts published in May 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain 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 tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Jacek Stolarz
Asst Vice President - Analyst
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Michael J. Loughlin
Vice President - Senior Analyst
Public Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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