NEW YORK--(BUSINESS WIRE)--Fitch Ratings has revised the long-term rating to 'AA-' from 'AAA' and downgraded the short-term rating to 'F1' from 'F1+' assigned to the $125,500,000 Dormitory Authority of the State of New York court facilities lease revenue bonds (The City of New York Issue), series 2005B. The long-term rating action is in connection with the substitution of the irrevocable direct-pay letter of credit (LOC) issued by Bayerische Landesbank (guaranteed obligation, rated 'AAA/F1+', Stable Outlook) which provided credit support for the bonds covering principal, interest and purchase price with a liquidity facility in the form of an LOC issued by Mizuho Bank, LTD. acting through its New York Branch (Mizuho, rated 'A-/F1', Stable Outlook). The Mizuho LOC only provides for the payment of purchase price of tendered bonds. The long-term rating is based on the 'AA-' rating assigned by Fitch to the bonds.
KEY RATING DRIVERS:
The short-term 'F1' rating is based on the liquidity support provided by Mizuho, in the form of a substitute LOC which has a stated expiration date of Nov. 23, 2020, unless extended or earlier terminated, during the daily and weekly interest rate mode only. The long-term rating of 'AA-' is based on the city's overall credit quality (general obligation bonds rated 'AA') and the legal features of the series 2005B bonds. The bonds are payable from lease payments made by the city, subject to annual appropriation, under a master lease. The Rating Outlook is Stable. (For more information on the long-term rating, see the press release 'Fitch Rated New York City's (NY) $915MM GOs 'AA'; Outlook Stable' dated May 28, 2015, available on Fitch's website at www.fitchratings.com.)
The substitute LOC 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 and weekly 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 Mizuho LOC will expire on Nov. 23, 2020, the stated expiration date, unless such date is extended; upon conversion to a mode other than daily or weekly; or upon the occurrence of certain events of default which result in a mandatory tender of the bonds. A mandatory tender of the bonds is scheduled to occur on the SBPA substitution date on Nov. 24, 2015. The remarketing agent for the bonds is BofA Merrill Lynch.
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 bond obligor and will reflect all changes to that rating.
Additional information is available at www.fitchratings.com.
Rating Guidelines for Variable-Rate Demand Obligations and Commercial Paper Issued with External Liquidity Support (pub. 22 Jan 2015)
U.S. Municipal Structured Finance Criteria (pub. 23 Feb 2015)
Dodd-Frank Rating Information Disclosure Form