New York, March 31, 2011 -- Moody's assigns Aaa (sf) ratings to six bonds issued by Georgia Environmental
Loan Acquisition Corporation
Moody's Investors Service announced that it has ratings to the following
bonds ("the Bonds") issued by Georgia Environmental Loan Acquisition
Corporation (the "Issuer"):
Aaa (sf) to the U.S. $8,645,000 Georgia
Environmental Loan Acquisition Corporation Local Government Loan Securitization
Bond (Loan Pool), Series 2011 due March 2012;
Aaa (sf) to the U.S. $20,640,000 Georgia
Environmental Loan Acquisition Corporation Local Government Loan Securitization
Bond (Loan Pool), Series 2011 due March 2014;
Aaa (sf) to the U.S. $23,375,000 Georgia
Environmental Loan Acquisition Corporation Local Government Loan Securitization
Bond (Loan Pool), Series 2011 due March 2016;
Aaa (sf) to the U.S. $12,365,000 Georgia
Environmental Loan Acquisition Corporation Local Government Loan Securitization
Bond (Loan Pool), Series 2011 due March 2017;
Aaa (sf) to the U.S. $51,230,000 Georgia
Environmental Loan Acquisition Corporation Local Government Loan Securitization
Bond (Loan Pool), Series 2011 due March 2021; and
Aaa (sf) to the U.S. $86,500,000 Georgia
Environmental Loan Acquisition Corporation Local Government Loan Securitization
Bond (Loan Pool), Series 2011 due March 2031.
RATINGS RATIONALE
Moody's ratings of the Bonds address the ultimate cash receipt of
all required interest and principal payments, as provided by the
Bonds' governing documents, and are based on the expected
loss posed to bondholders, relative to the promise of receiving
the present value of such payments.
The Issuer of the Bonds is a corporation formed under the Georgia Nonprofit
Corporation Code. The Bonds are issued in furtherance of the Issuer's
purpose, which is to, among other things, purchase loans
from the Georgia Environmental Finance Authority. These loans,
which are issued to various municipal borrowers throughout the state of
Georgia for water and sewer projects, back the Bonds.
Moody's analyzed the credit quality of the underlying loans by using
the ratings of related entities or by developing credit estimates.
For the loans to unrated borrowers, Moody's based the credit
estimate on the General Obligation rating of the associated county or
city, with adjustments made for systems with low water and sewer
debt service coverage ratios. Moody's assessed loans to borrowers
with no public ratings whatsoever by using the output from Moody's
Quantitative Ratings Estimator (QRATE®).
In addition to the credit quality of the underlying loans, Moody's
also considered the structural and legal aspects of the transaction in
arriving at its rating. The Issuer uses the total proceeds from
the underlying loans to pay interest and principal on the Bonds,
as well as any contractual fees. A debt service reserve account
supports any shortfalls in the loan proceeds. The debt service
reserve account has a floor of $5,000,000, which
further supports the longer-maturity bonds. Additionally,
the principal of the Bonds will be paid down on an ongoing basis with
loan proceeds to maintain a minimum over-collateralization ratio.
Moody's estimated the expected loss posed to bondholders,
relative to the promise of receiving the present value of such payments,
by modeling the transaction. Moody's modeled the transaction
by simulating defaults and the resulting cash-flows to determine
the likelihood of losses under different scenarios. The average
equivalent rating for the underlying pool is an A1 on the global scale.
Moody's also assumed a 90% recovery rate on resumed loan
payments following a modeled default. Because of the full concentration
of the underlying loans in Georgia Water and Sewer, Moody's
assumed a 70% asset correlation between borrowers. Moody's
found the expected loss estimates to be robust for a reasonable range
of changes to these assumptions.
The V Score for this transaction is Medium. As there is presently
no V Score assigned to the Municipal CDO sector, the V Score was
assigned by Moody's Rating Committee after considering each element
of the V Score following the principals outlined in Updated Report on
V Scores and Parameter Sensitivies for Structured Finance Securities,
published December 2008. The most volatile input into the V Score
calculation was a Medium/High score in the area of Analytic Complexity.
The Medium/High was assigned since this transaction is the first of its
kind and the method of calculation of the cash flows is different from
the typical pooled transaction.
Moody's V Scores provide a relative assessment of the quality of available
credit information and the potential variability around the various inputs
to a rating determination. The V Score ranks transactions by the
potential for significant rating changes owing to uncertainty around the
assumptions due to data quality, historical performance, the
level of disclosure, transaction complexity, the modeling
and the transaction governance that underlie the ratings. V Scores
apply to the entire transaction, rather than individual tranches
The principal methodology used in rating the bonds was Moody's Approach
to Rating Collateralized Loan Obligations, published in August,
2009 and available on www.moodys.com in the Rating Methodologies
sub-directory under the Research & Ratings tab.
Other methodologies and factors that may have been considered in the process
of rating this issue can also be found in the Rating Methodologies sub-directory
on Moody's website. In addition, Moody's publishes
a weekly summary of structured finance credit, ratings and methodologies,
available to all registered users of our website, at www.moodys.com/SFQuickCheck.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or financial
instruments in this transaction.
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 assigning
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.
New York
Joy Hart
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Algis Remeza
Senior Vice President
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's assigns Aaa (sf) ratings to six bonds issued by Georgia Environmental Loan Acquisition Corporation
