Fitch Takes Various Actions on Premier Health, OH's 2016C, 2016D, 2016E, & 2016F Hospital Revs
--$28,975,000 series 2016C;
--$27,140,000 series 2016D;
--$42,715,000 series 2016E;
--$42,715,000 series 2016F.
The Rating Outlook is Stable for the long-term rating.
KEY RATING DRIVERS:
The long-term rating is based jointly on the underlying rating assigned to those bonds by Fitch (currently rated 'A+'/Outlook Stable), and the rating assigned by Fitch to Barclays Bank PLC (rated 'A/F1'/Outlook Stable), which provides the irrevocable direct-pay letters of credit (LOCs) (one per series) supporting the bonds. The LOCs have an initial stated expiration date of Aug. 29, 2020, unless such date is extended or earlier terminated, while the bonds are in the daily and weekly interest rate modes only. The short-term 'F1' ratings are based solely on the LOCs. For information about the underlying credit rating see Fitch's press release dated Aug. 18, 2016 and available at www. fitchratings. com.
Fitch's dual-party pay criteria consider the likelihood of the failure of both a rated obligor and a bank LOC provider. The methodology results in a long-term rating that is up to two notches higher than the stronger of the two credits if the following conditions are met: (1) both entities have a rating of 'A' or higher; (2) the transaction is structured such that payments from both the municipal issuer and the bank are in the flow of funds and both entities would have to fail to perform before the bonds defaulted; and (3) the interest rate modes to be covered by Fitch's rating provide for either a mandatory purchase at the end of each interest rate period, or a purchase demand option. A one or two notch uplift will apply to the long-term rating depending on the frequency of the purchase demand option or the duration of the interest rate period which concludes with a mandatory tender.
The bonds provide holders with a tender option daily in the daily rate mode and upon seven days' notice in the weekly interest rate mode. Fitch will apply a two notch uplift which results in a long-term rating of 'AA' for the bonds.
The bank is obligated to make payments of principal of and interest on the bonds upon maturity, acceleration, or redemption, as well as purchase price for tendered bonds. The LOCs provide full and sufficient coverage of principal plus an amount equal to 45 days' interest at a maximum rate of 15% based on a year of 365 days and purchase price for tendered bonds, while in the daily and weekly rate modes. Barclays Capital Inc. is the remarketing agent for the bonds. The bonds are expected to be delivered on or about Aug. 31, 2016.
The bonds initially bear interest at a daily rate. Each series may be converted to a weekly, daily, two-day, index, stepped coupon, term, or fixed rate. While the bonds bear interest in the daily or weekly rate mode, interest payments are on the first business day of each month commencing Oct. 3, 2016. The trustee is obligated to make timely draws on the LOCs to pay principal, interest, and purchase price. Funds drawn under the LOCs are held uninvested, and are free from any lien prior to that of the bondholders.
Holders may tender their bonds on any business day, provided the tender agent and remarketing agents are given the requisite prior notice of the purchase. Each series of bonds is subject to mandatory tender: (1) upon conversion of the interest rate; (2) upon expiration, substitution or termination of the LOC; (3) on a business day no more than five days following trustee's receipt of notice from the bank that the interest component of the LOC will not be reinstated; (4) and on a business day not later than 10 days following trustee's receipt of notice from the bank of an event of default under the reimbursement agreement, but at least one business day prior to termination of the LOCs. Notice of an event of default may also result in an immediate acceleration of the bonds. Optional and mandatory redemption provisions also apply to the bonds. There are no provisions for the issuance of additional bonds.
Bond proceeds will be used to refinance certain outstanding Bonds previously issued by the Issuer for the benefit of Miami Valley Hospital.
The long-term rating is tied to the long-term rating assigned to the bonds and the long-term rating that Fitch maintains on the bank providing the LOC. Changes to one or both of these ratings may affect the long-term rating assigned to the bonds. Additionally, if either the underlying bond rating or the bank rating were downgraded to 'A-' or lower, the dual-party pay criteria could no longer be applied, and the long-term rating assigned to the bonds would then be adjusted to the higher of the bank rating and the underlying bond rating.
The short-term rating is exclusively tied to the short-term rating that Fitch maintains on the bank providing the LOC and will reflect all changes to that rating.