NEW YORK--(BUSINESS WIRE)--Fitch Ratings has upgraded the City of Cleveland, Ohio's airport system revenue bonds, series 2008D and 2009D, to 'AA/F1+' from 'A+/F1'. The Rating Outlook is Stable for the long-term rating.
The rating action is in connection with the substitution of the irrevocable direct-pay letters of credit (LOCs) previously provided by Bank of America, N.A. (rated 'A+/F1', Stable Outlook) with substitute letters of credit (LOCs) to be issued by U.S. Bank National Association (rated 'AA/F1+', Stable Outlook) and the mandatory tender of the bonds.
KEY RATING DRIVERS:
The long-term 'AA' rating is based on the higher of the underlying long-term rating assigned to the bonds by Fitch (currently rated 'BBB+, Stable Outlook), and the long-term rating assigned by Fitch to U.S. Bank National Association (rated 'AA/F1+', Stable Outlook'), the bank providing each LOC securing the bonds. Each LOC has an initial stated expiration date of July 28, 2019, unless extended or earlier terminated, during the daily and weekly interest rate modes only. The short-term 'F1+' rating is based solely on the LOC. For information about the underlying credit rating, see 'Fitch Affirms Cleveland, Ohio's Airport System Revs at 'BBB+'; Outlook Revised to Stable', dated Nov. 11, 2015 and available at 'www.fitchratings.com'.
Pursuant to the substitute LOCs, 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. 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 U.S. Bank substitute LOCs provide full and sufficient coverage of principal plus an amount equal to 51 days of interest at a maximum rate of 12% based on a year of 365 days and purchase price for tendered bonds, while in the daily and weekly rate modes. The Remarketing Agent for the bonds is U.S. Bancorp Investments, Inc. and U.S. Bank Municipal Products Group.
The long-term rating is tied to the Fitch long-term rating assigned to the bonds and the long-term rating that Fitch maintains on the substitute bank providing the LOC. Changes to one or both of these ratings may affect the long-term rating assigned to the bonds.
The short-term rating is exclusively tied to the short-term rating that Fitch maintains on the bank providing the substitute LOC and will reflect all changes to that rating.
Additional information is available at 'www.fitchratings.com'.
Rating Criteria for Letter of Credit-Supported Bonds and Commercial
Paper (pub. 05 Apr 2016)
U.S. Municipal Structured Finance Criteria (pub. 23 Feb 2015)
Dodd-Frank Rating Information Disclosure Form