New York, July 12, 2012 -- Moody's Investors Service has upgraded the letter of credit backed ratings of the Illinois Health Facilities Authority's Variable Rate Demand Revenue Bonds, (Riverside Health System), Series 1994 and 2002B (collectively, the Bonds) to Aa3/VMIG 1 from A3/VMIG 2. The upgrades are in conjunction with the delivery of irrevocable direct pay letters of credit to be provided by JPMorgan Chase Bank, N.A. (the Bank) and are scheduled to occur on July 12, 2012.
SUMMARY RATING RATIONALE
The ratings will be based upon the irrevocable direct pay letters of credit to be provided by JPMorgan Chase Bank, N.A.; the structure and legal protections of the transaction, which provide timely debt service and purchase price payments to investors; and Moody's evaluation of the creditworthiness of the Bank.
Moody's currently rates JPMorgan Chase Bank, N.A. long-term and short-term other senior obligations (OSO) Aa3 and P-1, respectively.
Flow Of Funds
The bond trustee is instructed to draw under the applicable letter of credit for principal and interest in accordance with its terms in order to receive payment of principal and/or interest on the Bonds on each interest payment date, maturity date, redemption date or acceleration date of the Bonds. The bond trustee is also instructed to draw under the applicable letter of credit in accordance with its terms on each purchase date for an amount sufficient, along with any remarketing proceeds, to make full payment of purchase price on all the Bonds tendered on the same business day.
Bonds that are purchased by the Bank due to a failed remarketing are held by the bond trustee and will not be released until the bond trustee has received written confirmation from the Bank stating that the applicable letter of credit has been reinstated for the full amount of the purchase price drawn for such Bonds.
Letters of Credit
The letters of credit are each sized for full principal plus 51 days of interest at the maximum rate of 12%, and will provide for sufficient coverage for the Bonds while they bear interest in the daily and weekly rate modes.
Draws on the Letters of Credit
Conforming draws under each applicable letter of credit for principal and interest received by the Bank by 11:00 a.m.Chicago time, on a business day, will be honored by 2:00 p.m., Chicago time, on the same day. Conforming draws for purchase price received by the Bank by 10:00 a.m., Chicago time, on a business day, will be honored by the Bank by 2:00 p.m., Chicago time, on the same day.
Reinstatement of Interest Draws
Draws made under each letter of credit for interest shall be automatically reinstated on the fourth business day following the Bank's honoring of such drawing, unless prior to the close of business on the third business day following the Bank's honoring of such interest drawing the bond trustee receives a notice from the Bank stating than an event of default has occurred under the reimbursement agreement or the Bank has not been reimbursed for an interest drawing, and as a consequence the interest component of the letter of credit will not be reinstated. For the Series 1994 Bonds, upon receipt of such notice , the bond trustee is directed to cause a mandatory redemption no later than 4 days following receipt of such notice. For the Series 2002B Bonds, upon receipt of such notice, the bond trustee is directed to cause a mandatory tender no later than 5 days following receipt of such notice.
Reimbursement Agreement Defaults
The Bank may deliver written notice to the bond trustee stating that an event of default has occurred and is continuing under the reimbursement agreement and directing the bond trustee to arrange for a mandatory purchase of the Series 2002B Bonds or a mandatory redemption of the Series 1994 Bonds, in each case, in accordance with the provisions of the trust indenture. The bond trustee shall arrange for such a mandatory redemption of the Series 1994 Bonds no later than 4 calendar days following its receipt of such notice. The bond trustee shall arrange for such a mandatory tender and purchase of the Series 2002B Bonds no later than 5 calendar days following its receipt of such notice. In each case, the letter of credit will terminate 15 days following the bond trustee's receipt of such notice.
Expiration / Termination of the Letters of Credit
Each letter of credit expires upon the earliest to occur of (i) the stated expiration date for the applicable letter of credit: July 12, 2017 for Series 1994 and November 15, 2017 for Series 2002B; (ii) five calendar days following the Bank's receipt of notice from the bond trustee stating that (a) a substitute letter of credit has been issued to replace the existing letter of credit, (b) no Bonds remain outstanding, or (c) all draws required to be made under the trust indenture and available under the letter of credit have been honored by the Bank; (iii) the earlier of: (a) five calendar days following conversion of the Bonds to a rate mode other than the daily or weekly mode; or (b) the honoring of a mandatory tender drawing in connection with such conversion; (iv) fifteen days following the bond trustee's receipt of notice from the Bank stating that an event of default under the reimbursement agreement has occurred and directing a mandatory redemption (for the Series 1994 Bonds) or a mandatory tender of the Bonds (for the Series 2002B Bonds); or (v) the date on which an acceleration drawing is honored by the Bank.
Substitution
Substitution of the letters of credit is permitted. The Series 2002B Bonds are subject to mandatory tender on the substitution date of the letter of credit. The Series 1994B Bonds are subject to mandatory tender of the Bonds on the date on which the substitute letter of credit will go into effect unless such substitution will not result in a reduction or withdrawal of the ratings on the bonds. Draws for purchase price on the substitution date will be made under the existing letter of credit, to the extent remarketing proceeds are not available, and the bond trustee shall not surrender the existing letter of credit until all draws have been honored.
Optional Tenders
Bondholders may optionally tender their Bonds, while the Bonds are in the daily rate mode, on any business day, by providing notice to the bond trustee and remarketing agent, prior to 9:30 a.m., Chicago time, on such date. Bondholders may also optionally tender their Bonds, while the Bonds are in the weekly rate mode with at least seven days prior written notice to the bond trustee. Bondholders tendering their Bonds will receive a purchase price equal to the par amount of the Bonds tendered plus accrued interest.
Mandatory Purchases
The Bonds are subject to mandatory tender on the following dates: (i) on any date on which the Bonds are converted from one interest rate mode to another; (ii) 20 days prior to the stated expiration date of the applicable letter of credit; (iii) for the Series 2002B Bonds, on any substitution date for the letter of credit; (iv) for the Series 1994 Bonds, on any substitution date unless such substitution will not result in a reduction or withdrawal of the ratings on the Bonds; (iv) for the Series 2002B Bonds, five calendar days following the bond trustee's receipt of notice from the Bank that an event of default under the reimbursement agreement has occurred and directing the bond trustee to affect a mandatory tender of the Bonds.
Mandatory Redemptions
The bonds of each series are subject to mandatory sinking fund redemptions. The Series 1994 Bonds are subject to mandatory redemptions no later than 4 days following the trustee's receipt of notice from the Bank stating either: (a) that an event of default under the reimbursement agreement has occurred and directing a mandatory redemption; or (b) the interest component of the letter of credit has not been reinstated.
Key Contacts:
Bond Trustee: The Bank of New York Mellon Trust Company, N.A.
Remarketing Agent: Barclays Capital, Inc.
WHAT COULD CHANGE THE RATING-UP
Long-Term: The long-term ratings on the Bonds would be upgraded if the long-term OSO rating of the Bank was upgraded.
Short-Term: Not applicable
WHAT COULD CHANGE THE RATING-DOWN
Long-Term: The long-term ratings on the Bonds would be downgraded if the long-term OSO rating of the Bank was downgraded.
Short-Term: The short-term ratings on the Bonds would be downgraded if the short-term OSO rating of the Bank was downgraded.
METHODOLOGY
The principal methodology used in rating this issue was Moody's Rating Methodology for Rating U.S. Public Finance Transactions Based on the Credit Substitution Approach published in August 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES -
The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.
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Robert Azrin Vice President - Senior Analyst Public Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653David A. ParsonsAsst Vice President - Analyst Public Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
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