NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns a rating of 'AA/F1+' (both long- term and short-term ratings on Rating Watch Negative to reflect the current ratings assigned by Fitch to Citibank, N.A.; see below) to the $175,000,000 Washington Health Care Facility Authority revenue bonds (Swedish Health Services) consisting of:
--$100,000,000 series 2011B;
--$75,000,000 series 2011C.
The long-term ratings assigned to each series is determined using Fitch's dual-party pay criteria and is based jointly on the underlying rating assigned to those bonds by Fitch (currently rated 'A+', with a Stable Outlook), and the support provided by the irrevocable direct-pay letters of credit (LOCs) issued by Citibank, N.A. (rated 'A+/F1+', both long and short-term ratings on Rating Watch Negative). The short-term 'F1+,' Rating Watch Negative ratings are based solely on the LOCs. For information about the underlying credit rating see the press release dated Feb. 2, 2011 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 Citibank and the obligor which results in a rating of 'AA', Rating Watch Negative 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.
The bank is obligated to make payments of principal of and interest on the bonds upon maturity, acceleration and redemption, as well as purchase price for tendered bonds. The ratings will expire upon the earliest of: (a) Feb. 28, 2014, the initial stated expiration date of the LOCs, unless such date is extended; (b) conversion from the weekly rate mode; (c) any prior termination of the LOCs; and (d) defeasance of the bonds. The LOCs provide full and sufficient coverage of principal plus an amount equal to 52 days of interest at a maximum rate of 12% based on a year of 365 days and purchase price for tendered bonds, while in the weekly rate mode. The Remarketing Agent for the bonds is CitiBank. The bonds are expected to be delivered on or about March 2, 2011.
The bonds will initially bear interest at a weekly rate, but may be converted to a daily or fixed rate. While bonds bear interest in the weekly rate mode, interest payments are on the first Wednesday of each month, commencing April 6, 2011. 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 trustee and remarketing agent are 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 LOCs; (3) on the tenth day (or the preceding business day if such day is not a business day) following the trustees' receipt of written notice from the bank of an event of default under the reimbursement agreement, and (4) on the second day following the trustees' receipt of written notice from the bank that the interest component will not be reinstated directing such mandatory tender. The bonds may also be accelerated following trustee's receipt of notice of an event of default under the reimbursement agreement. Optional and mandatory redemption provisions also apply to the bonds. There are no provisions for the issuance of additional bonds.
The Series 2011B bond proceeds are being used to refund the 2006 bonds.
The Series 2011C bond proceeds are being used to finance the cost of certain capital expenditures to be incurred by the corporation for remodeling, constructing, acquiring and equipping of it inpatient, outpatient and administrative facilities.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'U.S. Municipal Structured Finance Rating Criteria', Aug. 16, 2010;
--'Rating Guidelines for Letter of Credit-Supported Bonds', April 29, 2009,
--'Dual-Party Pay Criteria for Long-Term Ratings on LOC-Supported U.S. Public Finance Bonds', June 11, 2009.
Applicable Criteria and Related Research:
Dual-Party Pay Criteria For Long-Term Ratings on LOC-Supported U.S. Public Finance Bonds
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=447146
U.S. Municipal Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548588
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