NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns a rating of 'A/F1' with Stable Outlook to the $3,940,000 California Infrastructure and Economic Development Bank variable rate demand revenue bonds (Catalina Island Museum Project), Series 2014.
KEY RATING DRIVERS
The rating is based on the support provided by an irrevocable direct- pay letter of credit (LOC) issued by Bank of the West (rated 'A/F1'; Stable Outlook).
The bank is 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. The ratings will expire upon the earliest of: (a) April 1, 2019, the initial stated expiration date of the LOC, unless such date is extended; (b) conversion to the fixed rate mode; (c) any prior termination of the LOC; and (d) defeasance of the bonds. The LOC provides full and sufficient coverage of principal plus an amount equal to 45 days of interest at a maximum rate of 10% 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 Gates Capital Corporation. The bonds are expected to be delivered on or about April 17, 2014.
The bonds initially bear interest at a weekly rate, but may be converted to a fixed rate. While bonds bear interest in the weekly rate mode, interest payments are on the first business day of each month, commencing May 1, 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 and remarketing agent is given the requisite prior notice of the purchase. The bonds are subject to mandatory tender: (i) upon conversion of the interest rate; (ii) upon substitution of the LOC. The bonds shall be mandatory redemption: (i) upon the expiration of the letter of credit and (ii) following trustee's receipt of a notice of non-interest reinstatement or an event of default under the reimbursement. Optional and mandatory redemption provisions also apply to the bonds. Additional bonds may be issued provided that such additional bonds (i) receive a separate series designation and the trustee is prohibited from drawing on the LOC to make payment on the additional bonds or (ii) the current LOC is amended and increased to reflect the additional bonds and separate series designation. The trust indenture requires rating confirmation on the series 2004 bonds if additional bonds are issued.
Bond proceeds will be used to finance the cost of the project.
RATING SENSITIVITIES
The rating is exclusively tied to the short and long-term rating that Fitch maintains on the bank providing the LOC and will reflect all changes to that rating.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'U.S. Municipal Structured Finance Criteria' (Feb. 24, 2014);
--'Rating Guidelines for Letter of Credit-Supported Bonds' (June 14, 2013).
Applicable Criteria and Related Research:
U.S. Municipal Structured Finance Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=736618
Rating Guidelines for Letter of Credit-Supported Bonds
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=710476
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=827008
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