$545.9 million of asset backed securities rated.
New York, November 09, 2009 -- Moody's Investors Service has assigned the definitive rating of Aaa to
the $545.9 million of transition bonds issued by Entergy
Texas Restoration Funding, LLC, a special purpose limited
liability company whose sole member is Entergy Texas Inc. (ETI).
The bond issuance is permitted under the State of Texas legislation that
authorizes utilities to recover certain costs via securitization.
Such costs relate to the damages caused by any tropical storm or hurricane,
ice or snow storm, flood or other weather-related event or
natural disaster that occurs in calendar year 2008 or thereafter.
The complete rating action is as follows:
Issuer: Entergy Texas Restoration Funding, LLC
$182,500,000 Senior Secured Transition Bonds,
Tranche A-1, interest rate 2.12%, final
maturity date February 1, 2016, rated Aaa
$144,800,000 Senior Secured Transition Bonds,
Tranche A-2, interest rate 3.65%, final
maturity date August 1, 2019, rated Aaa
$218,600,000 Senior Secured Transition Bonds,
Tranche A-3, interest rate 4.38%, final
maturity date November 1, 2023, rated Aaa
The bonds are backed by transition property created by the state's legislation
and an irrevocable financing order issued by the Public Utility Commission
of Texas (PUCT) that authorizes the imposition and collection of a transition
charge on all existing and future retail electric service customers of
ETI in its service territory, with a minor exception, throughout
the life of the bonds. The transition charge will be adjusted periodically
to ensure timely payment of debt service for the bonds.
The principal methodology used in rating the transaction is described
below. Other methodologies and factors that may have been considered
in the process of rating this issuer can also be found in the Rating Methodologies
sub-directory on www.moodys.com.
V-SCORE AND LOSS SENSITIVITY
Moody's V Score. The V Score for this transaction is Low,
which is the same as the V score assigned for the utility fee bonds or
stranded costs bonds sector. The V Score indicates "Low" uncertainty
about critical assumptions.
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).
Moody's Parameter Sensitivities. While the bonds are subject to
political, regulatory and legal risks, we view such risks
as remote. The bonds are also exposed to the risk of declines in
the rate payer base in the servicer area of ETI. However,
it would require dramatic declines in the rate base to impact the rating
of the bonds. We view the likelihood of such dramatic declines
as remote. Therefore, the parameter loss sensitivity analysis
is not presented for this transaction.
Parameter Sensitivities are not intended to measure how the rating of
the security might migrate over time, rather they are designed to
provide a quantitative calculation of how the initial rating might change
if key input parameters used in the initial rating process differed.
The analysis assumes that the deal has not aged. Parameter Sensitivities
only reflect the ratings impact of each scenario from a quantitative/model-indicated
standpoint. Qualitative factors are also taken into consideration
in the ratings process, so the actual ratings that would be assigned
in each case could vary from the information presented in the Parameter
Sensitivity analysis.
PRINCIPAL RATING METHODOLOGY
The primary asset backing the notes is an intangible property created
by special Texas legislation and specifically authorized by an irrevocable
financing order issued by PUCT. The state statutes provide a state
pledge that the state will not take any action that might impair the interest
of the bondholders. The financing order issued by PUCT is irrevocable,
and cannot be repealed once the statutory appeal period has passed.
The financing order authorizes a surcharge on the customer's bill to pay
debt service on the bonds. It also stipulates that the surcharges
are nonbypassable, meaning that any user of electricity in the utility'
service area must pay this surcharge with only very limited exceptions.
The financing order also stipulates that if one class of customers consume
less electricity or fail to pay, then the surcharge will be raised
on the rest of the customer base. This essentially means that there
is a joint and several obligation by all the current and future users
of electricity in the service territory of the utility to pay off the
utility fee bonds.
The credit enhancement to the transaction mainly consists of a true-up
mechanism stipulated in the financing order, which entitles the
servicer to adjust the surcharge periodically in order to pay the required
interest and scheduled principal payments. The periodic adjustments
include mandatory annual adjustments as well as non-routine adjustments
which might become necessary if there are unexpected declines in electricity
consumption which might cause a shortfall for the scheduled debt service.
If the bond is not paid off by the expected final maturity date,
then more frequent adjustments such as monthly adjustments will be allowed.
Mandatory standard adjustments are automatically approved by the commission.
Non-routine true-ups may need a proceeding, but the
scope of the proceeding is limited to determine whether the proposed adjustment
complies with the financing order. The financing order requires
the public services commission to issue an order by the proposed true-up
adjustment date. In case PUCT cannot issue its order by that date,
then the servicer will be permitted to implement its proposed changes.
While the bonds are subject to political, regulatory and legal risks,
we view such risks as remote. The bonds are also exposed to the
risk of declines in the rate payer base in the servicer area of ETI.
However, it would require dramatic declines in the ETI rate base
to impact the rating of the bonds. We view the likelihood of such
dramatic declines as remote.
ADDITIONAL RESEARCH
The special report, "Updated Report on V Scores and Parameter Sensitivities
for Structured Finance Securities" is available on moodys.com.
Additional research, including the pre-sale report for this
transaction and reports for prior transactions, are available at
www.moodys.com. 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.
New York
Mark DiRienz
Managing Director
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Xiaochao Wang
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's assigns definitive rating of Aaa to utility Entergy Texas Inc.'s transition bonds
