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Fitch Rates Knox County Tennessee Health Revs 2008 Catholic Healthcare Ptnrs 'AA+/F1+'
NEW YORK-(Business Wire)-May 6, 2008 - Fitch Ratings assigns a rating of 'AA+/F1+' to the Health, Educational and Housing Facility Board of the County of Knox (Tennessee) adjustable rate hospital facilities revenue bonds, series 2008 (Catholic Healthcare Partners), consisting of:
—$30,000,000 series 2008A;
—$45,000,000 series 2008B.
The long-term 'AA+' rating is based jointly on Catholic Healthcare Partners (the obligor, currently rated 'AA-' by Fitch) and the support provided by separate irrevocable, direct-pay letters of credit (LOC) issued by Landesbank Baden-Wurttemberg, acting through its New York Branch (the Bank; currently rated 'A+/F1+') securing the bonds. The short-term 'F1+' rating is based solely on the LOC.
The long-term 'AA+' rating is based on Fitch's methodology which considers the likelihood of the failure of both a rated obligor and a bank LOC provider. The methodology results in a 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 obligor 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. In this instance, there is a low degree of correlation. If either of the obligor or the Bank were to be downgraded to below 'A', this methodology would no longer be applicable and the ratings would be revised to reflect the higher of the rating assigned to the bank or the rating assigned to the Obligor.
The Bank is obligated to make payments of principal and interest when due as well as purchase price for tendered bonds during the daily and weekly interest rate modes. The rating for either series of bonds will expire upon the earliest of: May 13, 2011, the initial expiration date of the LOC, unless such date is extended; any prior termination of the LOC; or defeasance of the bonds. The LOCs provide full coverage of principal plus an amount equal to 50 days' interest at a maximum rate of 12% based on a 365-day year, and purchase price for tendered bonds. The remarketing agent for the Series 2008A bonds is Morgan Keegan & Company, Inc. The remarketing agent for the Series 2008B bonds is J. P. Morgan Securities, Inc. The bonds are expected to be available for delivery on or about May 15, 2008.
The bonds will initially bear interest in the weekly interest rate mode, but may be converted to a daily, commercial paper, SIFMA floater, LIBOR-based short-term, long-term or fixed interest rate mode. While in the weekly mode, interest will be paid on the first Wednesday of each month, commencing June 4, 2008. While the bonds are in the weekly rate mode, bondholders may tender bonds on any business day, with seven days prior notice. The bonds are subject to mandatory tender (i) on each interest rate conversion date; (ii) on the day following the end of each commercial paper period; and (iii) upon the expiration, non-reinstatement, termination or substitution of the LOC. Optional and mandatory redemption provisions also apply to the bonds.
Bond proceeds will be used to refinance outstanding debt of the obligor.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.
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