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Fitch Announces Guidelines for Forward Purchase Agreement Providers
CHICAGO & NEW YORK-(Business Wire)-July 3, 2008 - Fitch Ratings expands its Investment Provider Guidelines, (published on April 25, 2008 and available on the Fitch Ratings web site at www.fitchratings.com) to include Forward Purchase Agreement (FPA) providers. FPAs are typically used to hedge reinvestment risk in debt service reserves, float funds and acquisition accounts. FPA providers agree to sell into these accounts short term permitted securities yielding agreed-upon rates for the life of the agreement, in exchange for cash from the maturing securities.
For bond programs and stand-alone issues rated 'AA-' or higher, Fitch's guidelines call for a minimum FPA provider rating of 'AA-/F1+'. For bond program and stand-alone issues rated 'A-' to 'A+', a minimum provider rating of 'A/F1' applies. If FPA providers are rated or downgraded below the minimum rating guidelines, then the future yields that are assumed for the reserves will be discounted according to the stress rates listed in Fitch USD LIBOR Stresses, available at www.fitchratings.com.
If an FPA provider's rating is downgraded below the relevant minimum rating guideline, causing Fitch to discount future yields, Fitch will determine whether this would impact the bond program or stand-alone issue rating. If so, the bond program or stand-alone issue rating will be downgraded, or placed on Rating Watch Negative, pending a substitution of the FPA provider.
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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