On the effective date of Jan. 28, 2015, Fitch Ratings will take the following actions on the Triborough Bridge and Tunnel Authority (TBTA) general revenue variable rate bonds (VRBs), consisting of:
--$85,270,000 subseries 2003B-1;
--$54,555,000 subseries 2003B-3;
--$122,420,000 subseries 2005A;
--$193,100,000 subseries 2005B-2.
Fitch will:
--Downgrade to 'AA+/F1', Stable Outlook, from 'AAA/F1+', Stable Outlook, the ratings assigned to subseries 2003B-1;
--Confirm the 'AA+/F1+', Stable Outlook, ratings assigned to subseries 2003B-3;
--Assign an 'AA+/F1+', Stable Outlook, to series 2005A;
--Assign an 'AA+/F1+', Stable Outlook, to series 2005B-2.
The rating actions are in connection with the mandatory tender to occur on January 28, and TBTA's plan to: (a) substitute the irrevocable direct-pay letter of credit (LOC) issued by CalPERS ('AAA/F1+', Stable Outlook) currently providing support for the subseries 2003B-1 with an LOC to be provided by PNC Bank, NA ('A+/F1', Stable Outlook); (b) substitute the LOC issued by US Bank, NA ('AA-/F1+', Stable Outlook) currently providing support for the subseries 2003B-3 with an LOC to be provided by Wells Fargo Bank, NA ('AA-/F1+', Stable Outlook); (c) issue series 2005A, to be supported by an LOC provided by TD Bank, NA ('AA-/F1+', Stable Outlook); and (d) issue series 2005B-2 with an LOC to be provided by Wells Fargo Bank, NA ('AA-/F1+', Stable Outlook). Series 2005A and 2005B-2 will be issued as a restructuring and remarketing of the current subseries 2005A-1, A-2, and A-3, and subseries 2005B-2a, B-2b, and B-2c.
KEY RATING DRIVERS:
The long-term ratings will be determined using Fitch's dual-party pay criteria and will be based jointly on the underlying rating assigned to those bonds by Fitch (currently 'AA-', Stable Outlook), and the rating assigned by Fitch to each of the banks which will provide the LOCs as support for the bonds. The short-term 'F1+' rating will be based solely on the LOCs. For information about the underlying credit rating see press release dated Jan. 13, 2015 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 each of the banks and the obligor which results in a rating of 'AA+' 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.
Pursuant to the LOCs, the banks are obligated to make regularly scheduled payments of principal and interest on the bonds in addition to payments due upon maturity and redemption, as well as purchase price for tendered bonds. The ratings will expire upon the earliest of: (a) Jan. 26, 2018 (Jan. 28, 2020 for series 2005A), the initial stated expiration date of the LOCs, unless such date is extended; (b) conversion to a mode other than daily (except for 2003B-1) or weekly rate; (c) any prior termination of the LOC; and (d) defeasance of the bonds. The LOCs provide full and sufficient coverage of principal plus an amount equal to 53 days of interest at a maximum rate of 9% based on a year of 365 days and purchase price for tendered bonds, while in the daily (except for series 2003B-1) or weekly rate mode.
RATING SENSITIVITIES:
As described above, the long-term rating is tied to the long-term rating assigned to the bond obligor and the long-term rating that Fitch maintains on the 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 LOC and will reflect all changes to that rating.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'U.S. Municipal Structured Finance Criteria', February 24, 2014;
--'Rating Guidelines for Letter of Credit-Supported Bonds and Commercial Paper', June 4, 2014,
--'Dual-Party Pay Criteria for Long-Term Ratings on LOC-Supported U.S. Public Finance Bonds', March 8, 2013.
Applicable Criteria and Related Research:
U.S. Municipal Structured Finance Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=736618
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.
