Fitch to Take Various Rating Actions on JEA's 2000 Series A Electric System Sub Revs
On the effective date of Jan. 16, 2013, Fitch Ratings will downgrade the long-term rating to 'AA' Outlook Stable from 'AAA', Outlook Stable and confirm the short-term rating of 'F1+' assigned to the $100,000,000 ($65,610,000 currently outstanding) JEA variable rate electric system subordinated revenue bonds, 2000 series A (the bonds).
The rating actions are in connection with the substitution of the direct-pay letter of credit currently provided by Bank of Montreal, acting through its Chicago Branch ('AA-/F1+, Stable Outlook) with a Standby Bond Purchase Agreement (SBPA) to be issued by the Bank of Montreal, acting through its Chicago Branch for the bonds; and (ii) the mandatory tender of the bonds, which will occur on Jan. 16, 2013. The bonds will also be converted from the weekly rate mode to the flexible rate mode on that date.
Currently, the long-term 'AAA', Stable Outlook rating is based on the Bank of Montreal letter of credit and the application of Fitch's dual party pay approach. On the effective date, the long-term 'AA' rating with a Stable Outlook will reflect the bond rating assigned by Fitch to JEA's electric system subordinated revenue bonds. For more information on the long-term rating, see Fitch's press release dated Dec. 21, 2012, available at 'www.fitchratings.com'. On the effective date, the short-term 'F1+' ratings will be based on the support of the substitute SBPA provided by the Bank of Montreal.
While in the flexible rate mode, the substitute SBPA is sized to cover the payment of the principal component of purchase price and is sufficient for tendered bonds in the flexible rate mode in the event that the proceeds of a remarketing of the bonds are insufficient to pay the purchase price following a mandatory tender. Bonds in the flexible rate mode may not be tendered at the option of the holder. JEA is obligated to pay the interest portion of the purchase price due on a flexible rate payment date, which is also a mandatory tender date and interest payment date. In the event the Bonds are converted to bear interest in the daily or weekly rate modes, the substitute SBPA will provide interest coverage equal to 31 days of interest calculated at a maximum rate of 12% based on a 365 day year, which will be sufficient to pay purchase price of optionally tendered bonds (provided the bank has agreed to such coverage pursuant to an amendment to the SBPA prior to the conversion).
The substitute SBPA will expire upon the earliest of: Jan. 15, 2016, the stated expiration date of the SBPA, unless such date is extended; conversion of all the bonds to an interest rate mode other than the flexible rate mode (unless otherwise agreed to by the bank in connection with an amendment to the SBPA in order to convert to the daily or weekly rate modes); substitution of the SBPA; the date of notice to the bank that there are no bonds outstanding; or upon the occurrence of certain other events of default which result in a mandatory tender or other termination events related to the credit of JEA and the electric system subordinated revenue bonds which result in an automatic and immediate termination.
The short-term 'F1+' rating will expire on the expiration or prior termination of the SBPA or upon the conversion of the interest rate mode to a rate other than the daily, weekly, or flexible rate modes. The short-term rating may be adjusted upward or downward in conjunction with the long-term rating of JEA's electric system subordinated revenue bonds or the short-term rating of the bank. A mandatory tender of the bonds is scheduled to occur on the substitution date of Jan. 16, 2013. BMO Capital Markets GKST Inc. will serve as remarketing agent for the 2000 Series A bonds.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'U.S. Municipal Structured Finance Rating Criteria' (Feb. 28, 2012);
--'Rating Guidelines for Variable-Rate Demand Obligations Issued with External Liquidity Support' (Feb. 1, 2012).
Applicable Criteria and Related Research:
U.S. Municipal Structured Finance Criteria
Rating Guidelines for Variable-Rate Demand Obligations Issued with External Liquidity Support
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