NEW YORK--(BUSINESS WIRE)--Fitch Ratings revises the long-term ratings and assigns short-term ratings to the following Metropolitan Transportation Authority, NY transportation revenue variable rate bonds:
--$100,000,000 Subseries 2015E-1 'AA+/F1+';
--$250,000,000 Subseries 2015E-2 'AA-/F1';
--$200,000,000 Subseries 2015E-3 'AA/F1';
--$50,000,000 Subseries 2015E-4 'AA-/F1'.
The Rating Outlook is Stable for the long-term rating on all the subseries of bonds.
KEY RATING DRIVERS:
The long-term rating 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', Stable Outlook), and the rating assigned by Fitch to (i) U.S. Bank, National Association (rated 'AA-/F1+', Stable Outlook)for Subseries 2015E-1, (ii) The Bank of Tokyo-Mitsubishi UFJ, LTD (rated 'A/F1', Stable Outlook) for Subseries 2015E-2, (iii) Citibank, N.A.(rated 'A+/F1', Stable Outlook) for Subseries 2015E-3,and (iv) Bank of the West (rated 'A/F1', Stable Outlook)for Subseries 2015E-4, which provide the irrevocable direct-pay letters of credit (LOCs) supporting the bonds.
The short-term 'F1+' and 'F1' ratings are based solely on the respective LOC. For information about the underlying credit rating see Fitch's press release 'Fitch Rates Metro Transportation Auth (NY) Railroad Rehabilitation Infrastructure Financing Loan 'A'' dated May 5, 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 the Banks and the obligor which results in a long-term ratings of 'AA+' for the Subseries 2015E-1 bonds, 'AA-' for the subseries 2015E-2 bonds, 'AA' for the Subseries 2015E-3 bonds and 'AA-' for the Subseries 2015E-4 bonds. If either the underlying bond rating or the respective bank'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 respective bank's rating and the underlying bond rating.
The banks are obligated to make regularly scheduled payments of principal of and interest on the bonds in addition to payments due upon maturity, and redemption, as well as purchase price for tendered bonds. Each LOC has a stated expiration date of Sept. 7, 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 9% based on a year of 365 days and purchase price for tendered bonds, while in the daily and weekly rate mode for subseries 2015E-1 and E-4 and the weekly rate mode for Subseries 2015E-2 and Subseries 2015E-3. The Remarketing Agents are U.S. Bancorp Municipal Securities Group, a division of U.S. Bank National Association and U.S. Bancorp Investment, Inc. for Subseries 2015E-1, Citigroup Global Markets, Inc. for Subseries 2015 E-2 and E-3 and Loop Capital Markets LLC for subseries 2015E-4. The bonds are expected to be delivered on or about Sept. 10, 2015.
The Subseries 2015E-1 bonds initially bear interest at a daily rate and the Subseries 2015E-2, E-3 and E-4 will initially bear interest in the weekly rate mode. Each subseries may be may be converted to a daily, weekly, commercial paper, term auction or fixed rate. Interest payments are on the first business day of each month for each subseries, commencing Oct. 1, 2015. The trustee is obligated to make timely draws on the respective LOC 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 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
Bond proceeds will be used to refinance certain outstanding indebtedness issued by MTA for transit and commuter projects in addition to finance transit and commuter projects.
RATING SENSITIVITIES
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.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Dual-Party Pay Criteria for Long-Term Ratings on LOC-Supported U.S. Public Finance Bonds (pub. 08 Mar 2013)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=701572
Rating Guidelines for Letter of Credit-Supported Bonds and Commercial Paper (pub. 21 May 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866152
U.S. Municipal Structured Finance Criteria (pub. 23 Feb 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=862222
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=990301
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=990301
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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