Fitch Downgrades S-T Rating to 'F1' on NYC TFA Bonds, Series 2003 1E & 2F
OREANDA-NEWS. Fitch Ratings has downgraded to 'F1' from 'F1+' the short-term rating assigned to the New York City Transitional Finance Authority New York City Recovery Bonds, Fiscal 2003 Series 1, Subseries 1E and Fiscal 2003 Series 2, Subseries 2F (the bonds).
The rating action is in connection with the substitution of the standby bond purchase agreements currently provided by Bayerische Landesbank (guaranteed obligations) (rated 'AAA/F1+'/Stable Outlook) with a substitute standby letter of credit (SLOC) to be provided by Sumitomo Mitsui Banking Corporation (rated 'A/F1',/Stable Outlook) for both series of the bonds.
KEY RATING DRIVERS
The short-term 'F1' rating is based on the liquidity support provided by Sumitomo Mitsui Banking Corporation in the form of a standby letter of credit (SLOC), which has a stated expiration date of Nov. 27, 2020, unless extended or earlier terminated, during the weekly rate mode. The substitute SLOC does not cover scheduled principal and interest payments.
The long-term 'AAA', Stable Outlook rating currently assigned to the bonds continues to be based on the rating assigned by Fitch to the recovery bonds for the New York City Transitional Finance Authority. For more information on the long-term rating of New York City Transitional Finance Authority, see the press release dated Oct. 16, 2015 on Fitch's website at www.fitchratings.com.
The substitute SLOC provides for the payment of the principal component of purchase price plus an amount equal to 185 days of interest at the maximum rate of 9%, based on a year of 365 days for tendered bonds during the weekly rate mode in the event that the proceeds of a remarketing of the bonds are insufficient to pay the purchase price following an optional or mandatory tender. The substitute SLOC will expire on Nov. 27, 2020, unless such date is extended, upon conversion to a mode other than the weekly rate mode; or upon the occurrence of certain events of default which result in a mandatory tender or other events of default related to the credit of the New York City Transitional Finance Authority which result in an automatic and immediate termination. The remarketing agent for the subseries 2003 1E bonds is Merrill Lynch, Pierce, Fenner and Smith, Incorporated. The remarketing agent for the subseries 2003 2F bonds is J.P. Morgan Securities LLC.
The short-term rating reflects the short-term rating that Fitch maintains on the bank providing liquidity support, and will be adjusted upward or downward in conjunction with the short-term rating of the bank and, in some cases, the long-term rating of the bonds. The long-term rating is exclusively tied to the creditworthiness of the bond obligor and will reflect all changes to that rating.