Fitch to Upgrade MTA Trans Rev Bds, Subseries 2005E-1 and 2005E-3 to 'AA+/F1+'
KEY RATING DRIVERS
The long-term rating will be determined using Fitch's dual-party pay criteria and will be based jointly on the underlying rating assigned to those bonds by Fitch (currently rated 'A', Outlook Stable), and the rating assigned by Fitch to the BMO, which will provide the substitute LOCs as support for both series of bonds. The short-term 'F1+' rating will be based solely on the substitute LOCs. For information about the underlying credit rating see the press release dated Aug. 13, 2015 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 credit of the bank and the rated obligor have no more than a medium degree of correlation. Fitch has determined a low degree of correlation between BMO and the obligor which results in a rating of 'AA+' for the bonds. 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.
Pursuant to the substitute LOCs, the bank is obligated to make regularly scheduled payments of principal and interest on the bonds in addition to payments due upon maturity and redemption, as well as purchase price for tendered bonds. The substitute LOCs have a stated expiration date of Aug. 24, 2018, unless extended or earlier terminated, and provide full and sufficient coverage of principal plus an amount equal to 53 days of interest at a maximum rate of 9% based on a year of 365 days and purchase price for tendered bonds, while in the daily or weekly rate mode. A mandatory tender of the bonds will occur on the substitution date on Aug. 27, 2015. The Remarketing Agent for the series 2005E-1 is Jeffries LLC and the remarketing agent for the series 2005E-3 bonds is Loop Capital Markets LLC.
As described above, the long-term rating is tied to the long-term rating assigned to the bond obligor and the long-term rating that Fitch maintains on the bank providing the substitute LOC. Changes to one or both of these ratings may affect the long-term rating assigned to the bonds.
The short-term rating is exclusively tied to the short-term rating that Fitch maintains on the bank providing the substitute LOC and will reflect all changes to that rating.