NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assigns a rating of 'AA+/F1+', Outlook Stable to the $24,825,000 County of Grand Traverse Hospital Finance Authority variable rate revenue refunding bonds (Munson Healthcare Obligated Group), series 2011B. The long-term 'AA+', Outlook Stable rating is determined using Fitch's dual-party pay criteria and is based jointly on the underlying rating assigned to those bonds by Fitch (currently rated 'AA-', Outlook Stable), and the support provided by the letter of credit (LOC) issued by JPMorgan Chase Bank, N.A. (JPMorgan; rated 'AA-/F1+', Outlook Stable). The short-term 'F1+' rating is based solely on the LOC. For information about the underlying credit rating, see Fitch's press release dated July 13, 2011 available at 'www.fitchratings.com'.
Fitch's dual-party pay criteria consider the likelihood of the failure of both a rated obligor and a bank LOC provider. The methodology results in a long-term rating that is up to two notches higher than the stronger of the two credits if the following conditions are met: (1) both entities have a rating of 'A' or higher; (2) the transaction is structured such that payments from both the municipal issuer and the bank are in the flow of funds and both entities would have to fail to perform before the bonds defaulted; and (3) the credit of the bank and the rated obligor have no more than a medium degree of correlation. Fitch has determined a low degree of correlation between JPMorgan and the obligor which results in a rating of 'AA+', Outlook Stable for the bonds. If either the underlying bond rating or the bank rating were downgraded to 'A-' or lower, the dual-party pay criteria could no longer be applied, and the long-term rating assigned to the bonds would then be adjusted to the higher of the bank rating and the underlying bond rating.
The bank is obligated to make payments of principal of and interest on the bonds upon maturity, acceleration and redemption, as well as purchase price for tendered bonds. The ratings will expire upon the earliest of: (a) Aug. 10, 2016, the initial stated expiration date of the LOC, unless such date is extended; (b) conversion to any mode other than daily or weekly; (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 35 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 daily and weekly rate modes. The Remarketing Agent for the bonds is Merrill Lynch, Pierce, Fenner & Smith Incorporated. The bonds are expected to be delivered on or about Aug. 10, 2011.
The bonds initially bear interest at a weekly rate, but may be converted to a daily, adjustable or fixed rate. While bonds bear interest in the weekly and daily rate modes, interest payments are on the first business day of each month, commencing Sept. 1, 2011. 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 are given the requisite prior notice of the purchase. The bonds are subject to mandatory tender: (1) upon conversion of the interest rate; and (2) upon expiration, substitution or termination of the LOC. The bonds shall be accelerated following trustee's receipt of notice of an event of default under the reimbursement agreement. Optional and mandatory redemption provisions also apply to the bonds. There are no provisions for the issuance of additional bonds.
Bond proceeds will be used to refinance outstanding debt of Munson Healthcare.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'U.S. Municipal Structured Finance Rating Criteria', April 25, 2011;
--'Rating Guidelines for Letter of Credit-Supported Bonds', July 26, 2011;
--'Dual-Party Pay Criteria for Long-Term Ratings on LOC-Supported U.S. Public Finance Bonds', March 10, 2011.
Applicable Criteria and Related Research:
U.S. Municipal Structured Finance Rating Criteria
Rating Guidelines for Letter of Credit-Supported Bonds
Dual-Party Pay Criteria for Long-Term Ratings on LOC-Supported U.S. Public Finance Bonds
Cindy Stoller, +1-212-908-0526
Media Relations, New York
Trudy Zibit, +1-212-908-0689
One State Street Plaza
New York, NY 10004
Janet Rosen, +1-312-368-3172
Joseph Staffa, +1-212-908-0829
KEYWORDS: United States North America Michigan New York
INDUSTRY KEYWORDS: Health Hospitals Professional Services Finance