NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns a rating of 'AA-/F1+' to the $5,350,000 Dallam County Industrial Development Corporation variable rate demand industrial development revenue bonds (Morning Star Dairy, LLC Project) 2015. The Rating Outlook for the long-term rating is Stable.
KEY RATING DRIVERS:
The rating is based on the support provided by an irrevocable direct-pay confirming letter of credit (CLOC) issued by Farm Credit Bank of Texas rated 'AA-/F1+', Stable Outlook by Fitch which confirms an irrevocable direct-pay letter of credit (LOC) issued by Capital Farm Credit PCA which is not rated by Fitch. The CLOC and the LOC each have an initial stated expiration date of Sept. 10, 2016. The CLOC and LOC expiration dates automatically extend for one-year periods unless notice is sent at least 105 days prior to the expiration date of non-extension.
The LOC 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 CLOC bank is obligated to make a payment for all outstanding bonds in the event the LOC bank fails to honor any draw or repudiates its obligations under the LOC. The LOC provides full and sufficient coverage of principal plus an amount equal to 109 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 CLOC provides the same full and sufficient coverage as the LOC. The Remarketing Agent for the bonds is The Frazer Lanier Company, Inc. The bonds are expected to be available on or about Sept. 10, 2015.
The bonds will 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 Thursday of each December, March, June and September. The next interest payment date is scheduled for Dec. 3, 2015. The trustee is obligated to make timely draws on the LOC to pay principal, interest, and purchase price. In the event the LOC bank fails to honor a draw or repudiates its obligations under the LOC, the trustee will declare an event of default and direct an immediate acceleration of all the bonds and draw on the CLOC for the amount of all outstanding bonds. Funds drawn under the LOC are held uninvested or may be invested in accordance with rating guidelines 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 to a fixed rate mode; or (2) upon expiration, substitution or termination of the LOC or CLOC. Optional and mandatory redemption provisions also apply to the bonds. There are no provisions for the issuance of additional bonds.
The proceeds of the bonds will be used to acquire, construct and equip the solid waste disposal components of a heifer facility and a dairy facility to be owned and operated by the borrower.
RATING SENSITIVITIES
The rating is exclusively tied to the short- and long-term rating that Fitch maintains on the bank providing the CLOC and will reflect all changes to that rating.
Additional information is available on www.fitchratings.com
Applicable Criteria
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=990339
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=990339
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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