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19 Nov 2019
New York, November 19, 2019 -- Moody's Investors Service has assigned the VMIG-1 short-term rating to the Sevier County Public Building Authority, Tennessee Local Government Public Improvement Bonds, Series VI-K-1 (the Bonds) in conjunction with a conversion of the Bonds from the index rate period to the daily rate period, currently scheduled for December 2, 2019. The Bonds are secured by loan payments from Knox County, TN (the Borrower) which are absolute and unconditional, and are backed by the County's general obligation, unlimited tax pledge. Moody's maintains a Aa1 on the Series VI-K-1 as well as the county's outstanding rated general obligation debt.
RATINGS RATIONALE
The VMIG 1 short-term rating is derived from (i) the credit quality of U.S. Bank National Association (the Bank) as liquidity support provider under the Standby Bond Purchase Agreement (SBPA or Liquidity Facility), (ii) the long-term rating of the Bonds and (iii) Moody's assessment of the likelihood of an early termination of the SBPA without a final mandatory tender. Events that would cause termination of the SBPA without a mandatory purchase of the Bonds are directly related to the credit quality of the Borrower. Accordingly, the likelihood of any such event occurring is reflected in the Aa1 long-term rating currently assigned to the Bonds. Our current short-term Counterparty Risk (CR) Assessment of the Bank is P-1(cr).
FACTORS THAT COULD LEAD TO AN UPGRADE
-Not applicable
FACTORS THAT COULD LEAD TO A DOWNGRADE
-Moody's downgrades the short-term CR Assessment of the Bank.
-Moody's downgrades the long-term rating of the Bonds.
LIQUIDITY SUPPORT FOR TENDERS
The Bank may automatically terminate its payment obligation under the SBPA upon:
-Non payment of principal and/or interest on the Bonds or on any parity debt;
-A final and non-appealable judgment against the Borrower in excess of $5 million remains unpaid, unstayed, undischarged or undismissed for a period of 60 days;
-bankruptcy or insolvency of the Borrower;
-the Borrower imposes a debt moratorium, debt restructuring or comparable extraordinary restriction on repayment of debt with respect to the Bonds, liquidity advances or any general obligation debt; or any government authority with jurisdiction over the Borrower imposes a debt moratorium or debt restructuring or comparable extraordinary restriction on repayment of debt with respect to the Bonds, liquidity advances or all general obligation debt;
-Any provision of the governing transaction documents relating to the payment of principal of and interest on the Bonds, Bank Bonds, general obligation debt or the pledge of the full faith and credit and taxing power of the Borrower shall cease to be valid and binding or fully enforceable as determined by any governmental authority; validity or enforceability of any provisions in the governing transaction documents related to payment of principal and interest or the pledge of the full faith and credit and taxing power of the Borrower shall be contested or repudiated in writing by the Borrower, or a court or government authority shall make a finding or ruling that (i) contests or repudiates the validity or enforceability of such provisions, or (ii) the Bonds or any governing transaction document is null and void, or not binding; the Borrower shall deny that it has any liability or obligation under the governing transaction documents; a court or any government authority shall find or rule that the holders of the Bonds and general obligation debt cease to have an effective pledge of the full faith and credit and taxing power of the Borrower;
-withdrawal, suspension or downgrade below investment grade of the long-term rating of the Bonds or any other parity debt by each rating agency then rating the Bonds;
-dissolution or termination of the existence of the Borrower
The Bonds are converting to the daily rate period with interest paid on the first day of each March, June, September and December. The interest rate period may be converted, in whole, to the weekly, short-term, medium-term, CP, fixed or ARS rate period. Bonds so converted will be subject to mandatory tender upon each rate period change date. Moody's short-term rating applies while the Bonds are in the daily and weekly rate periods only.
Bonds in the daily rate period are subject to optional tender on any business day with notice to the trustee and the remarketing agent by 10:00 a.m., New York City time. Bonds in the weekly rate period may be optionally tendered on any business day with notice to the trustee and the remarketing agent not less than seven days prior to the purchase date.
The Bonds are subject to mandatory tender on: (i) each rate period change date; (ii) the third business day prior to the expiration date of the SBPA; (iii) the business day prior to the effective date of the substitute SBPA; (iv) the fifteenth (15th) day (or if not a business day, the next succeeding business day) following the trustee's receipt of notice of the occurrence of an event of default under the SBPA (other than an automatic termination event).
The SBPA, which is sized for the full principal amount of the Bonds plus 95 days of interest at 15%, the maximum rate for the Bonds, will secure payments of purchase price while the Bonds are in the daily or weekly rate periods. The SBPA will be available to pay purchase price to the extent remarketing proceeds received are insufficient. Under the terms of the SBPA, conforming draws received by the Bank by 12:00 p.m. (New York time) will be honored by 2:30 p.m. (New York time) on the same business day.
The SBPA terminates upon the earliest to occur: (a) the stated expiration date, December 1, 2022; (b) the date on which the SBPA is terminated in its entirety due to the occurrence of an automatic termination event; (c) the date on which all of the Bonds have been redeemed, canceled, accelerated or paid in full, (d) the earlier of (i) the 30th day following the trustee's receipt of notice of termination from the Bank, or (ii) the date on which the Bank purchases the Bonds pursuant to the mandatory tender of the Bonds that occurs as a result of the termination notice, (e) the earlier of (i) the business day succeeding the conversion of all the Bonds to a rate period other than the daily or weekly, or (ii) the conversion date, provided, that the Bank has honored the drawing in connection with such conversion; (f) the earlier of (i) the business day succeeding the substitution date or (ii) the substitution date, provided, that the Bank has honored the drawing in connection with such substitution.
METHODOLOGY
The principal methodology used in this rating 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 this methodology.
REGULATORY DISCLOSURES
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.
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
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Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Susanne Siebel
Lead Analyst
Regional PFG Northeast
Moody's Investors Service, Inc.
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Christopher Coviello
Additional Contact
Regional PFG Northeast
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
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JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
No Related Data.
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