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30 Jan 2018
New York, January 30, 2018 -- Moody's Investors Service affirms the VMIG 1 short-term rating and maintains the Aa2 long-term rating on the State of Oregon, Oregon Facilities Authority Revenue Bonds (Reed College Projects), 2008 Series A (the Bonds).
Moody's has, at the request of Reed College (the College), reviewed the short-term rating of the Bonds in conjunction with the delivery of an amended and restated standby bond purchase agreement (SBPA or liquidity facility) provided by Wells Fargo Bank, N.A. (the Bank). The delivery of the amended and restated SBPA is currently scheduled to be effective January 31, 2018.
Upon delivery of the SBPA the short-term rating will continue to be derived from (i) the credit quality of the Bank as provider of the SBPA and (ii) the likelihood of termination of the liquidity facility without a mandatory tender. Events which would cause the liquidity facility to terminate without a mandatory purchase of the bonds are directly related to the credit quality of the College. Accordingly, the likelihood of any such event occurring is reflected in the Aa2 long-term rating assigned to the Bonds. The Bank's current short-term counterparty risk assessment is P-1 (cr).
FACTORS THAT COULD LEAD TO AN UPGRADE
- Short-Term: Not applicable
FACTORS THAT COULD LEAD TO A DOWNGRADE
- Short-term: Downgrade of the short-term CR Assessment of the Bank or downgrade of the long-term rating of the Bonds.
The Bank's obligations under the SBPA can be immediately terminated or suspended as a result of the occurrence of any of the following events: (i) the College shall fail to pay principal and interest on the Bonds or on any debt on parity with the Bonds; (ii) the bankruptcy or insolvency of the College; (iii) any provision of the SBPA, the Bonds or other governing documents related to the payment of principal or interest on the Bonds shall be declared null and void, invalid or unenforceable by a governmental authority with jurisdiction; (iv) an authorized officer of the College shall (a) claim that the provisions requiring the College to make principal and interest payments on the Bonds is not valid and binding, (b) repudiate the College's obligations under the SBPA, the Fifth Supplement or other governing document with respect to payment of principal or interest on the Bonds or (c) initiate legal proceedings seeking an adjudication that the provisions requiring the College to make principal and interest payments on the Bonds and on Purchased Bonds under the SBPA, the Fifth Supplement or other governing documents is not valid and binding; or (v) the entry or filing of a final and non-appealable judgment in excess of $5 million against the College and failure of the College to pay or satisfy such judgment within 60 days.
The Bonds currently bear interest at the weekly rate mode and pay interest on the first business day of each month. The interest rate mode is convertible, in whole, to the daily, short-term, long-term, auction or fixed rate mode. Upon any interest rate conversion(other than for conversion between the daily and weekly rate modes), the Bonds shall be subject to mandatory tender. The SBPA covers bonds in the weekly and daily rate modes. The short term rating for the Bonds will expire upon an interest rate conversion to a short-term, long-term, auction or fixed rate mode.
Purchase price payments for bonds tendered but not remarketed will be paid from remarketing proceeds and, to the extent that remarketing proceeds are not available, from a draw made by the trustee under the SBPA. The SBPA is to be drawn on by the trustee by 12:00 p.m. (New York time) on any purchase date to make timely payment of purchase price to the extent that the remarketing proceeds on deposit are insufficient.
During the weekly rate mode, holders may optionally tender their bonds on any business day with at least seven days prior notice, and in the daily rate mode, holders may optionally tender their bonds on any business day with notice by 9:30 a.m., New York time, to the trustee and remarketing agent. Bonds which are purchased by the Bank due to a failed remarketing may not be released by the trustee until the SBPA has been reinstated.
Substitution of the liquidity facility is permitted under the indenture provided there is a mandatory tender of the bonds on the effective date of such substitution. The bonds will also be subject to mandatory tender on (i) each interest rate conversion date (other than conversion between the weekly and daily rate modes); (ii) at the end of each term rate period; (iii) on the interest payment date preceding the expiration date of the SBPA; (iv) the business day preceding the voluntary termination date of the SBPA; or (v) on a business day selected by the trustee which date shall be not less than 30 days after the trustee's receipt of written notice from the Bank that an event of termination has occurred under the SBPA.
The SBPA, which is sized for the full principal amount of Bonds currently outstanding plus 34 days interest at 12%, the maximum rate for the Bonds, will secure payments of purchase price while the bonds bear interest in the weekly and daily rate modes. Under the terms of the SBPA, conforming draws received by the Bank by 12:00 p.m. will be honored by 2:00 p.m. on the same business day. All times are New York time.
The SBPA will terminate upon the earliest to occur: (i) the stated expiration date, January 31, 2023; (ii) the date on which the available commitment of the SBPA is reduced to zero; (iii) the business day following the substitution date of the liquidity facility; (iv) the business day following conversion of all the Bonds to a rate mode other than the daily or weekly modes; (v) the 34th day following receipt by the trustee of a notice of termination from the Bank as a result of the occurrence of an event of default under the SBPA provided that the Bank has honored the draw associated with such mandatory tender; or (vi) the date the SBPA automatically and immediately terminates.
The methodologies used in this rating are Higher Education published in December 2017 and Variable Rate Instruments Supported by Conditional Liquidity Facilities published in March 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.
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.
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
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
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