Fitch to Take Various Actions on Triborough Bridge and Tunnel Authority Ref Bonds Ser 2013D-2a&2b
OREANDA-NEWS. On the effective date of Dec. 17, 2015, Fitch Ratings will revise the Long-term ratings to 'AA' and assign 'F1' Short-term ratings to the following Triborough Bridge and Tunnel Authority (MTA Bridges and Tunnels) Subordinate Revenue Refunding Bonds:
--$58,020,000 Subseries 2013D-2a;
--$90,450,000 Subseries 2013D-2b.
The Rating Outlook for the long-term rating on both subseries of bonds is Stable.
The rating actions are in connection with (i) the remarketing of each of the subseries of bonds with the support of an irrevocable direct-pay letter of credit (LOC) issued by Bank of America, N.A. (BANA, 'A+'/'F1'/Stable Outlook) supporting both subseries of bonds and (ii) the mandatory tender of each subseries of bonds on Dec. 17, 2015.
KEY RATING DRIVERS
The current Long-term rating is the underlying long-term rating assigned to the bonds by Fitch. On the effective date, 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+'/Stable Outlook), and the Long-term rating assigned by Fitch to BANA, which will provide the LOC as support for the bonds. The Short-term 'F1' ratings are based solely on the BANA LOC. For information about the underlying credit rating see press release Fitch Rates Triborough Bridge & Tunnel Authority's(New York) Sub Lien Revs 'A+' dated Nov.10, 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 BANA and the obligor which results in a long-term rating of 'AA' for the Subseries 2013D-2a and the Subseries 2013D-2b bonds. If either the underlying bond rating or BANA's 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's rating and the underlying bond rating.
BANA is obligated to make regularly scheduled payments of principal of and interest on the bonds in addition to payments upon maturity, and redemption, as well as purchase price for tendered bonds. The LOC has a stated expiration date of December 14, 2018, unless extended or earlier terminated, and provides full and sufficient coverage of principal plus an amount equal to 53 days of interest at a maximum rate of 11% based on a year of 365 days and purchase price for tendered bonds, while in the daily and weekly rate modes. BofA Merrill Lynch is the remarketing agent for the bonds.
The Subseries 2013D-2a and Subseries 2013D-2b bonds initially bear interest at a weekly rate. Each subseries may be may be converted to a daily, weekly, commercial paper, term or fixed rate. Interest payments are on the first business day of each month for each subseries, commencing Jan. 4, 2016. The trustee is obligated to make timely draws on the LOC to pay principal, interest, and purchase price. Funds drawn under the LOC 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 is given the requisite prior notice of the purchase. The bonds are subject to mandatory tender: (1) upon conversion of the interest rate; (2) upon expiration, substitution or termination of the respective LOC; (3) following receipt of written notice from the bank of an event of default under the respective Letter of Credit and Reimbursement Agreement, and (4) following receipt of notice from the bank that the interest component will not be reinstated directing such mandatory tender. Optional and mandatory redemption provisions also apply to the bonds. There are no provisions for the issuance of additional bonds
As described above, the Long-term ratings are tied to the long-term ratings assigned to the bonds and the long-term ratings that Fitch maintains on the banks providing the related LOCs. Changes to one or both of these ratings may affect the long-term ratings assigned to the subseries of bonds.
The short-term ratings are exclusively tied to the Short-term ratings that Fitch maintains on the banks providing the related LOCs and will reflect all changes to those ratings.