CHICAGO--(BUSINESS WIRE)--Fitch Ratings has taken the following rating actions on the New York City Municipal Water Finance Authority (NYW) second general resolution revenue bonds, adjustable rate fiscal 2007 series CC:
--$160,500,000 subseries CC-1 bonds (CC-1 bonds) short-term rating downgraded to 'F1' from 'F1+';
--$50,000,000 subseries CC-2 bonds (CC-2 bonds) short-term rating affirmed at 'F1+'.
The short-term rating actions are in connection with: (i) the substitution of the liquidity support previously provided by The Bank of Nova Scotia (rated 'AA-/F1+'), acting through its New York agency, in the form of a Standby Bond Purchase Agreement (SBPA), with a substitute revocable standby letter of credit (SLOC) issued by Sumitomo Mitsui Banking Corporation (SMBC; rated 'A/F1', Negative Outlook), acting through its New York branch, in support of the CC-1 bonds and a substitute SBPA issued by the Bank of Montreal (rated 'AA-/F1+', Stable Outlook), acting through its Chicago branch, in support of the CC-2 bonds; and (ii) the mandatory tender of the bonds.
KEY RATING DRIVERS
NYW's long-term 'AA+' rating continues to reflect its legal framework, including its bankruptcy remote status, exceptionally large, diverse and economically important service area, its independent rate-setting authority, strong financial and capital program management, sound financial metrics, and high debt levels. For more information on Fitch's long-term rating on NYW, see the press release 'Fitch Rates New York City Muni Water Finance Authority's $200MM Revs 'AA+'; Outlook Stable' dated Sept. 16, 2016, available on Fitch's web site at 'www.fitchratings.com'.
The short-term 'F1' rating on the CC-1 bonds is based on the liquidity support provided by SMBC, in the form of a substitute SLOC, which has a stated expiration date of Oct. 5, 2021 unless extended or earlier terminated, during the weekly interest rate mode only. The short-term 'F1+' rating on the CC-2 bonds is based on the liquidity support provided by BMO, in the form of a substitute SBPA, which has a stated expiration date of Oct. 5, 2020 unless extended or earlier terminated, during the daily, weekly and two-day interest rate modes only. The long-term rating continues to be based on the rating assigned to the bonds. The Rating Outlook is Stable for the long-term rating.
The substitute SMBC SLOC provides for the payment of the principal component of purchase price plus an amount equal to 35 days of interest calculated at a maximum rate of 9%, based on a year of 365 days for tendered bonds during the weekly rate mode in the event that the proceeds of a remarketing of the bonds are insufficient to pay the purchase price following an optional or mandatory tender. The substitute SMBC SLOC will expire on Oct. 5, 2021, the stated expiration date, unless such date is extended; upon conversion to any mode other than weekly; or upon the occurrence of certain events of default which result in a mandatory tender or other events of default related to the credit of the bonds which result in an automatic and immediate termination.
The substitute BMO SBPA provides for the payment of the principal component of purchase price plus an amount equal to 35 days of interest calculated at a maximum rate of 9%, based on a year of 365 days for tendered bonds during the daily, weekly and two-day rate modes in the event that the proceeds of a remarketing of the bonds are insufficient to pay the purchase price following an optional or mandatory tender. The substitute BMO SBPA will expire on Oct. 5, 2020, the stated expiration date, unless such date is extended; upon conversion to any mode other than daily, weekly or two-day; or upon the occurrence of certain events of default which result in a mandatory tender or other events of default related to the credit of the bonds which result in an automatic and immediate termination.
A mandatory tender of the CC-1 and CC-2 bonds has occurred. The remarketing agent for the CC-1 bonds is Merrill Lynch, Pierce, Fenner & Smith Incorporated. The remarketing agent for the CC-2 bonds is Raymond James & Associates, Inc.
The short-term rating reflects the short-term rating that Fitch maintains on the bank providing liquidity support, and will be adjusted upward or downward in conjunction with the short-term rating of the bank and, in some cases, the long-term rating of the bonds. The long-term rating is exclusively tied to the creditworthiness of the bonds and will reflect all changes to that rating.
Additional information is available at www.fitchratings.com.
Rating Criteria for Variable-Rate Demand Obligations and Commercial Paper Issued with External Liquidity Support (pub. 28 Jan 2016)
U.S. Municipal Structured Finance Criteria (pub. 23 Feb 2015)
Dodd-Frank Rating Information Disclosure Form
Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed.
The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers.
For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001.