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Rating Action:

Moody's assigns Aa1/VMIG 1 to NYC TFA Future Tax Secured Subordinate Bonds Fiscal 2019 Series C, Subseries C-4 and assigned VMIG 1 to , Fiscal 2011 Series A Subseries A-4 and Fiscal 2010 Subseries G-6; outlook stable

04 Apr 2019

New York, April 04, 2019 -- Moody's Investors Service has assigned a Aa1/VMIG 1 rating to the New York City Transitional Finance Authority's $150 million Future Tax Secured Subordinate Bonds, Fiscal 2019 Series C, Subseries C-4 (Adjustable Rate Bonds). We have also assigned VMIG 1 ratings to $100 million outstanding Future Tax Secured Bonds, Fiscal 2010 Subseries G-6 Subordinate Bonds (Adjustable Rate Bonds) and $100 million outstanding Future Tax Secured Bonds, Fiscal 2011 Series A Subseries A-4 Taxable Subordinate Bonds (Adjustable Rate Bonds), currently index rate mode bonds, in conjunction with their reoffering as variable rate demand bonds. The long-term rating on those bonds also is Aa1. The outlook is stable.

RATINGS RATIONALE

The long-term ratings reflect high debt service coverage provided by the pledge of City of New York (Aa1 stable) personal income tax and sales tax revenues, a strong legal structure that insulates TFA from potential city fiscal stress, the open subordinate lien that permits future leverage of the pledged revenues, and New York State's (Aa1 stable) ability to repeal the statutes imposing the pledged revenues.

The short-term ratings are derived from: (i) the credit quality of (a) Barclay's Bank plc (the Bank) as provider of liquidity support in the form of a standby bond purchase agreements (SBPAs) for each subseries of bonds; and, (ii) Moody's assessment of the likelihood of an early termination of the SBPAs without a mandatory tender. Events that could cause the SBPAs to terminate without a mandatory purchase of the Bonds are directly related to the credit of the TFA. Accordingly, the likelihood of any such event occurring is reflected in the long-term rating assigned to the Bonds. Moody's short-term counterparty risk assessment of Barclay's Bank plc is P-1(cr).

RATING OUTLOOK

The rating outlook for TFA's Future Tax Secured Bonds is stable. Strong legal and structural payment mechanisms help to insulate the bonds from city and state fiscal stress, including short-term liquidity strain. Even through periods of economic weakness coverage of maximum annual debt service (MADS) remains strong, and while the TFA credit will continue to be used to finance New York City capital needs, we expect strong coverage to be maintained.

FACTORS THAT COULD LEAD TO AN UPGRADE

- For the subordinate lien long-term rating: a higher additional bonds test or other indenture provision increasing bondholder protections against possible dilution of coverage

- For the short-term rating: not applicable

FACTORS THAT COULD LEAD TO A DOWNGRADE

- For the long-term rating: significant weakening of the pledged revenues that reduces currently high levels of coverage

- For the long-term rating: large additional bond issuances that materially dilute coverage

- For the short-term rating: downgrade of the short-term CR Assessment of the Bank

- For the short-term rating: downgrade of the long-term rating of the bonds

LEGAL SECURITY

A key strength of TFA is its insulation from New York City bankruptcy risk. The state legislature established TFA as a separate and distinct legal entity from the city. Further, the state did not grant TFA itself the right to file for bankruptcy. While bondholders are protected from bankruptcy, city or state fiscal stress still could pose risks because both the city and the state retain the right to alter the statutory structure that secures TFA's bonds. The city has covenanted not to exercise those rights related to personal income taxes if debt service coverage would fall below 1.5 times MADS on outstanding bonds. Since the creation of TFA, policy actions have both increased and decreased the pledged revenues. Those actions have included the abolition of the city's income tax on commuters, and establishment of various sales tax exemptions.

TFA's original statutory authorization of $7.5 billion has been increased several times to $13.5 billion (plus $2.5 billion "Recovery Bonds") for senior and subordinate lien bonds. In 2009, legislation was enacted that allows TFA to exceed the $13.5 billion cap but counts debt over that amount, along with city general obligation debt, against the city's overall debt limit. As of January 31, 2019, the city had $32.9 billion of debt capacity.

The TFA indenture limits senior lien debt to $12 billion outstanding at any time, subject to a $330 million limit on debt service payable in any quarter (as well as the additional bonds test described below). The subordinate lien is open, subject to a conservative additional bonds test that requires at least 3 times the sum of $1.32 billion (covenanted MADS for senior bonds) and annual debt service on outstanding subordinate bonds. Additionally, the indenture requires that calculations of annual debt service reflect variable rate bonds bearing interest at their maximum rate.

The pledged taxes are collected by the New York State Department of Taxation and Finance and held by the state comptroller, who makes daily transfers to the trustee (net of refunds and the costs of collection). The trustee makes quarterly set-asides of amounts required for debt service due in the following quarter on the outstanding bonds, as well as TFA's operational costs (with the collection quarters beginning each August, November, February and May). Half of each quarterly set-aside is made beginning on the first day of the first month of each collection quarter and the second half is made beginning on the first day of the second month of each collection quarter. If sufficient amounts for debt service are not on deposit after those two months, the trustee continues to set aside funds in the third month, on a daily basis, until the deficiency is cured. Functionally, personal income tax revenues are expected to provide sufficient amounts for debt service; if they do not provide at least 1.5 times coverage of MADS, sales tax revenues are available to pay debt service. Additionally, future tax secured bonds issued before November 2006 have a first lien on appropriations of state building aid to the city if necessary to meet debt service requirements.

Liquidity Support for Tenders

The Bank's obligations under the SBPAs may be automatically terminated or suspended upon:

-Default by the TFA on the payment of principal or interest on the bonds or any debt senior to or on parity with the bonds;

-The bankruptcy or insolvency of the TFA;

-Imposition by the TFA, the state or any other governmental authority with jurisdiction over the TFA of a debt moratorium, debt restructuring, debt adjustment or comparable extraordinary restriction on repayment when due of the principal or interest on the bonds or all debt obligations of the TFA secured by a lien on tax revenues on a basis that is senior to or on parity with the bonds;

-Finding by a court of competent jurisdiction or initiation by the TFA of legal proceedings seeking a finding that the bonds or any provision of the SBPAs, the Indenture or the Resolution relating to the payment of principal and interest on the bonds or the pledge of the tax revenues supporting the bonds is null and void, invalid or unenforceable or that the TFA has no liability thereon;

-Assignment by each rating agency rating the bonds of a rating below investment grade to any debt senior to or on parity with the bonds, or withdrawal or suspension by each rating agency rating the bonds of any rating on debt senior to or on parity with the Bonds for credit related reasons;

-Failure by the TFA to satisfy a final non-appealable money judgment entered by a court or regulatory body of competent jurisdiction against the TFA in an amount in excess of $25 million.

The Resolution permits conversion of the bonds, in whole or in part, to daily, two-day, weekly, index, commercial paper, term, auction or fixed rate modes. Bonds so converted will be subject to mandatory tender upon conversion, except for when the bonds convert in whole to the daily, two-day and weekly rate modes. Each SBPA supports bonds in the daily, two-day or weekly rate modes. Moody's current short-term ratings apply while the bonds are in the daily, two-day or weekly rate modes. Bonds in the daily, two-day or weekly rate modes pay interest on the first business day of each month.

Bondholders may, at their option, tender bonds (i) during the daily rate mode on any business day with notice to the tender agent and remarketing agent by 10:30 a.m., New York City time; (ii) during the weekly rate mode on any business day with at least seven days prior notice to the tender agent and remarketing agent; and (iii) during the two-day mode on any business day with prior notice to the tender agent and remarketing agent by 3:00 p.m., New York City time, at least two business days prior to the tender date.

The bonds are subject to mandatory tender on: (i) each interest rate mode conversion date (other than the conversion of the bonds in whole to the daily, two-day and weekly rate modes); (ii) no later than the business day prior to the substitution date of the applicable SBPA unless confirmation is received from each rating agency then rating the Bonds that such substitution will not result in the reduction or withdrawal of the rating of the Bonds; (iii) no later than the business day prior to the expiration date of the applicable SBPA; (iv) no later than the business day prior to the termination date of the applicable SBPA as set forth in a default notice delivered by the Bank; and (v) on an optional redemption date, at the TFA's option, upon 10 days' notice to bondholders, if the TFA has provided a source of payment in accordance with the indenture and the Act.

Each SBPA provides principal in an amount equal to the bonds plus 35 days of interest at 9%, the maximum rate applicable to the bonds. Each SBPA is available to pay purchase price to the extent remarketing proceeds received are insufficient. Draws made on the SBPAs received at or prior to 12:00 p.m., New York City time, will be honored by 2:30 p.m., New York City time, on the same business day. Draws will be reinstated upon reimbursement of such drawings.

The commitment under each SBPA will terminate upon the earliest to occur of: (i) April 12, 2024, the scheduled expiration date; (ii) the earlier of (a) the date the Bank honors a drawing in connection with substitution of the SBPA or (b) the business day following the date of substitution of the SBPA; (iii) the date all bonds have been paid in full; (iv) the earlier of (x) the date the Bank honors a drawing in connection with conversion of all bonds to a mode other than daily, two day or weekly or (y) the business day following the date of conversion of all bonds to a mode other than daily, two day or weekly; and (v) the date on which the available commitment under the SBPA is terminated.

USE OF PROCEEDS

Proceeds of the Subseries C-4 bonds will be used to finance New York City's capital plan. Proceeds of the Subseries 2010 G-6 bonds and Subseries 2011 A-4 bonds will be used to convert the existing bonds.

PROFILE

TFA was created by the state legislature in 1997 as a public benefit corporation of the state to provide a method of financing New York City's vital capital construction program but outside the constraints of the debt limit imposed on the city by the state constitution.

METHODOLOGY

The principal methodology used in the long-term rating was US Public Finance Special Tax Methodology published in July 2017. The principal methodology used in the short-term ratings was 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.

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.

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.

Nicholas Samuels
Lead Analyst
State Ratings
Moody's Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
US
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Marcia Van Wagner
Additional Contact
State Ratings
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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