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Rating Action:

Moody's assigns Aaa to NYS Environmental Facilities Corp., SRF Bonds (NYCMWFA), Series 2022 A Subordinated Bonds; outlook stable

24 Mar 2022

New York, March 24, 2022 -- Moody's Investors Service (Moody's) has assigned Aaa rating to the proposed $388,255,000 of New York State Environmental Facilities Corporation (NYSEFC), State Clean Water and Drinking Water Revolving Funds (SRF) Revenue Bonds (New York City Municipal Water Finance Authority Projects - Second Resolution Bonds), Series 2022 A Subordinated SRF Bonds (the "Bonds"). The Bonds will be issued under the Financing Indenture of Trust (New York City Municipal Water Finance Authority Projects-Second Resolution Bonds), dated as of June 1, 2006 (NYCMWFA Subordinate SRF Indenture). The outlook is stable.

Additionally, Moody's maintains Aaa rating on the following:

- Outstanding parity bonds issued under the NYCMWFA Subordinate SRF Indenture.

- Outstanding bonds issued under the Financing Indenture of Trust (New York City Municipal Water Finance Authority Projects-Second Resolution Bonds), dated as of June 1, 2001 (NYCMWFA Senior SRF Indenture).

- Outstanding bonds issued under the Financing Indenture of Trust, dated June 1, 2010 (2010 SRF Indenture).

- Outstanding enhanced New York State Energy Research and Development Authority (NYSERDA), Residential Energy Efficiency Financing Revenue Bonds, Series 2013 A (Guaranteed Debt).

RATINGS RATIONALE

The Aaa rating reflects the strength of the combined NYSEFC's SRF loan portfolio repayment stream, the overall strong balance sheet of NYSEFC, and the track record of successful program management and oversight. Additionally, the rating reflects the program's legal structure that allows for transfer of excess cash flows between indentures and potential cross-investment between Clean Water and Drinking Water SRFs, in case of a payment deficiency. Somewhat counteracting these strengths is the SRF's high loan concentration in New York City Municipal Water Finance Authority (NYCMWFA). Excluding approximately $2 billion of Direct Loans, NYCMWFA accounts for about 63.2% of the combined clean water and drinking water loan pools. The concentration exposes the program to potential shifts in the credit quality of NYCMWFA. The risk, however, is remote given the high credit quality of NYCMWFA (Second General Resolution Bonds rated Aa1/stable).

RATING OUTLOOK

The outlook is stable reflecting our expectation that management will maintain strong financial and liquidity position, the credit quality of NYCMWFA will remain stable, and that additional leveraging of the program will not result in lower debt service coverage ratio or default tolerance.

FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING

- Not applicable

FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING

- A decline in the credit quality of NYCMWFA;

- An increase in the SRF leverage that results in weaker metrics, including the default tolerance and debt service coverage; and/or

- A significant deterioration in the credit quality of NYSEFC investments.

LEGAL SECURITY

Pledged borrowers' loan repayments are expected to be the main source of payment for the Bonds. The Bonds are also secured by the General Reserve Fund which is pledged to all NYCMWFA Subordinate SRF Bonds. Additionally, the Bonds are secured, on a subordinate basis to NYCMWFA Senior SRF Bonds, by moneys available from time to time in the De-allocated Reserve Account, the Deficiency Reserve Account and the Prior Indenture Support Fund. These moneys reflect de-allocations from the NYCMWFA Senior SRF Indenture and excess cash flows from the 2010 SRF Indenture.

Further, to the extent above pledged repayments are insufficient, NYSEFC has committed to use available, though not legally required, funds in Equity Account to pay debt service. As of September 30, 2021, the Equity Account's market value was approximately $1.5 billion (unaudited), consisting of short and long-term investments.

USE OF PROCEEDS

Bonds proceeds will be used to finance or refinance eligible water pollution control projects and drinking water projects and to refund certain bonds previously issued for water pollution control projects and drinking water projects.

PROFILE

NYSEFC is a public benefit corporation of the State of New York. It provides low-cost capital and technical assistance to municipalities, businesses and State agencies for environmental projects in New York State. The administration of the Clean Water SRF program and the Drinking Water SRF program is its main activity. Post this issuance, there will be about $366 million of NYCMWFA Senior SRF Bonds and $3.76 billion of NYCMWFA Subordinate SRF Bonds outstanding.

METHODOLOGY

The principal methodology used in this rating was Public Sector Pool Programs and Financings Methodology published in April 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1171420. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website 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.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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.

Omar Ouzidane
Lead Analyst
Housing
Moody's Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Eva Bogaty
Additional Contact
PF Healthcare
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.
© 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY100,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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