Fitch Rates $100MM MA Dev Fin Agency Partners HealthCare Bnds, Series M-1 & M-2 (2014) 'AA/F1+'

NEW YORK--()--Fitch Ratings assigns a rating of 'AA/F1+' to the Massachusetts Development Finance Agency revenue bonds, Partners HealthCare System, consisting of $50,000,000 series M-1 (2014, M-1 bonds) and $50,000,000 series M-2 (2014, M-2 bonds). The Rating Outlook is Stable, for the long-term rating.

KEY RATING DRIVERS:

The long-term 'AA', Stable Outlook rating on the M-1 bonds is based on the higher of the underlying long-term rating assigned to the bonds by Fitch (currently rated 'AA', Stable Outlook), and the long-term rating assigned by Fitch to U.S. Bank, National Association (U.S. Bank, rated 'AA-/F1+', Stable Outlook), the bank providing the irrevocable direct-pay letter of credit (LOC) securing the M-1 bonds. The long-term 'AA', Stable Outlook rating on the M-2 bonds is based on the higher of the underlying long-term rating assigned to the bonds by Fitch and the long-term rating assigned by Fitch to The Bank of New York Mellon (BNYM, rated 'AA-/F1+', Stable Outlook), the bank providing the LOC securing the M-2 bonds. The short-term 'F1+' ratings are based solely on the LOCs. For information about the underlying credit rating see press release dated Jan. 7, 2014, available at 'www.fitchratings.com'.

The banks are obligated to make regularly scheduled payments of principal of and interest on the bonds in addition to payments due upon maturity, acceleration and redemption, as well as purchase price for tendered bonds. Additionally, the bond obligor is in the flow of funds to make timely payments of principal and interest due upon maturity, acceleration and redemption. The credit-enhanced ratings on the M-1 bonds will expire upon the earliest of: (a) Jan. 30, 2019, the initial stated expiration date of the U.S. Bank LOC, unless such date is extended; (b) conversion to any interest rate mode other than daily or weekly; (c) any prior termination of the U.S. Bank LOC; and (d) defeasance of the bonds. The credit-enhanced ratings on the M-2 bonds will expire upon the earliest of: (a) Jan. 30, 2019, the initial stated expiration date of the BNYM LOC, unless such date is extended; (b) conversion to any interest rate mode other than weekly; (c) any prior termination of the BNYM LOC; and (d) defeasance of the bonds. The U.S. Bank LOC provides full and sufficient coverage of principal plus an amount equal to 47 days of interest at a maximum rate of 10% based on a year of 365 days and purchase price for tendered M-1 bonds, while in the daily and weekly rate modes. The BNYM LOC provides full and sufficient coverage of principal plus an amount equal to 35 days of interest at a maximum rate of 10% based on a year of 365 days and purchase price for tendered M-2 bonds, while in the weekly rate mode. The Remarketing Agents for the M-1 bonds are U.S. Bancorp Investments, Inc. and U.S. Bank Municipal Securities Group. The Remarketing Agent for the M-2 bonds is BNY Capital Markets, LLC. The bonds are expected to be delivered on or about Jan. 30, 2014.

The M-1 bonds initially bear interest at a daily rate, but may be converted to a weekly, index floating, term, long-term or fixed rate. The M-2 bonds initially bear interest at a weekly rate, but may be converted to a daily, index floating, term, long-term or fixed rate. While bonds bear interest in the daily and weekly rate modes, interest payments are on the first business day of the month, commencing Feb. 3, 2014. 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 trustee 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 related LOC; (3) following receipt of written notice from the related bank of an event of default under the reimbursement agreement, and (4) for the M-1 bonds, following receipt of notice from U.S. 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 for capital projects of Partners HealthCare.

RATING SENSITIVITIES:

The long-term ratings are tied to the Fitch 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 related long-term rating assigned to the 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 and Related Research:

--'U.S. Municipal Structured Finance Criteria', Feb. 27, 2013;

--'Rating Guidelines for Letter of Credit-Supported Bonds', June 14, 2013.

Applicable Criteria and Related Research:

Rating Guidelines for Letter of Credit-Supported Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=710476

U.S. Municipal Structured Finance Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=701570

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=817650

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst:
Janet Rosen, +1-312-368-3172
Analytical Consultant
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst:
Trudy Zibit, +1-212-908-0689
Managing Director
or
Committee Chairperson:
Mario Civico, +1-212-908-0796
Senior Director
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst:
Janet Rosen, +1-312-368-3172
Analytical Consultant
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst:
Trudy Zibit, +1-212-908-0689
Managing Director
or
Committee Chairperson:
Mario Civico, +1-212-908-0796
Senior Director
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
elizabeth.fogerty@fitchratings.com