New York, October 12, 2020 -- Moody's Investors Service (Moody's) has assigned a Aa1 enhanced
rating to Custodial Receipts (TD Bank), Custodial Receipts,
Series 2020-16A-C evidencing beneficial ownership of Health
and Educational Facilities Authority of the State of Missouri Health Facilities
Revenue Bonds (Mercy Health), Series 2020 (the Bonds).
RATINGS RATIONALE
The rating is based upon joint default analysis (JDA), which reflects
Moody's approach to rating jointly supported transactions. The
JDA rating is based on the long-term Counterparty Risk (CR) Assessment,
Aa1(cr), of The Toronto-Dominion Bank (the Bank) as provider
of the standby Letter of Credit (LOC), the underlying rating of
the deposited Bonds, and the structure and legal protections of
the transaction which provide for timely payment of debt service to Custodial
Receipt holders. Moody's underlying rating on the Bonds is A1.
Since a payment default on the Custodial Receipts would occur only if
both the Bank and the obligor default on bond principal and interest payment
dates, Moody's has assigned the rating based upon the joint probability
of default by both parties. In determining the joint probability
of default, Moody's considers the level of default dependence between
the Bank and the obligor. In this case, Moody's has determined
that there is a low level of default dependence between the Bank and the
obligor which results in a long-term JDA rating of Aa1 on the Custodial
Receipts.
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS
• Moody's upgrades either the long-term CR Assessment of the
Bank, or the long-term underlying rating of the Bonds.
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS
• Moody's downgrades the long-term CR Assessment of the Bank.
The Custodial Receipts pay interest on the same date on which interest
is paid on the Bonds in an amount equal to the interest paid on the Bonds
minus applicable fees, if any. The LOC covers amounts due
on the related Custodial Receipts on any bond payment date to the extent
that such amounts are not received by the custodian from the Bonds.
The LOC provider is also obligated to pay principal and interest due on
the Custodial Receipts upon any mandatory redemption of the Custodial
Receipts.
Payments to Custodial Receipt holders are first paid from the Bonds.
In the event of a bankruptcy filing of the obligor of the Bonds,
the custodian shall draw on the LOC for an amount equal to the amount
of principal and/or interest paid by the obligor on the Bonds during the
124 day period prior to such filing. Such amounts shall be held
by the custodian in the preference account and shall be available in the
event any such payments of principal and/or interest are subsequently
avoided as preference payments.
The amounts advanced to cover potential preference will be held the earlier
of (i) the date on which an order is received that payments to the Custodial
Receipt holders must be returned as a result of the bankruptcy proceeding
in which case the custodian shall pay over from the preference account
an amount equal to any payments of principal and interest on the Bonds
required to be returned; (ii) the date on which an order is received
that no such preference payments will be required to be returned or (iii)
the date on which notice has been received by the custodian that such
bankruptcy proceeding is closed or dismissed and such dismissal or closure
cannot be appealed in which case the funds in the preference account shall
be returned to the Bank.
The LOC is sized for the full principal amount of the Bonds plus 309 days
of interest at the Bond rate, which will provide sufficient principal
and interest coverage for the Custodial Receipts.
Substitution of the LOC is permitted subject to certain conditions,
including the receipt of written notice from each rating agency then rating
the Custodial Receipts that such substitute credit enhancement shall not
result in the reduction or withdrawal of the then current ratings on the
Custodial Receipts.
The Custodial Receipts are subject to mandatory redemption on the business
day prior to the Termination Date of the LOC. The Termination Date
shall mean the earliest of (A) the Expiration Date, September 15,
2021, (B) the 45th day following the custodian's receipt of notice
from the Bank that the rating on the Bonds have been downgraded below
Baa1; or (C) the fifth Business Day following; (i) the date
the custodian receives notice from the Bank that the Bank has not,
for any reason whatsoever, been reimbursed in full, together
with interest, for the amount of any drawing on the LOC, or
that any other amount referred to in the Custody Agreement as being payable
to the Bank has not been paid and satisfied in full, which amount
has remained unpaid or unsatisfied for five Business Days, (ii)
the date the custodian receives notice from the Bank that an event of
default relating to the Bonds has occurred and is continuing, (iii)
the date the custodian receives notice from the Bank that the Bank is
not or would not be in compliance with the Dodd Frank Wall Street Reform
and Consumer Protection Act and the rules promulgated thereunder as a
consequence, in whole or in part, of providing the LOC,
(iv) the date the LOC is surrendered to the Bank by the custodian for
cancellation, or (v) the date the Bank receives written notice from
the custodian that the Custody Agreement has terminated; provided,
however, if the Bank fails to pay the mandatory redemption price
of the Custodial Receipts subject to mandatory redemption on the date
such payment is due, the Termination Date shall automatically and
without further action be extended for 31 calendar days.
On any mandatory redemption date, if the Bank fails to pay the mandatory
redemption then such mandatory redemption shall be canceled and the LOC
shall remain in effect. The Custodial Receipts will remain outstanding
supported by the underlying Bonds and the LOC. The Custodial Receipts
are subject to redemption upon redemption of the Bonds.
In the event of a payment default by the Bank following a draw for principal
and or interest on a Bond payment date, the custodian shall distribute
all Bonds held by the custodian to the holders of the related Custodial
Receipts. Upon the distribution of Bonds, the Custodial Receipts
shall be treated as if they were surrendered for cancellation.
The principal methodology used in these ratings was Tender Option Bonds
and Related Instruments published in February 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1088098.
An additional methodology used in these ratings was Rating Transactions
Based on the Credit Substitution Approach: Letter of Credit-backed,
Insured and Guaranteed Debts published in May 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1068154.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
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 https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
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.
Randy Matlosz
Analyst
Public Finance Group
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
Michael J. Loughlin
Vice President - Senior Analyst
Public Finance Group
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
