(This is an amended version of a press release originally issuedMarch 1, containing revised information on the Rating Watch.)
Fitch Ratings assigns a rating of 'AA/F1+' (the short-termratings are on Rating Watch Negative to reflect the current short-term rating assigned by Fitch to Citibank, N.A.; see below) to the$175,000,000 Washington Health Care Facility Authority revenue bonds(Swedish Health Services) consisting of:
--$100,000,000 series 2011B;
--$75,000,000 series 2011C.
The long-term ratings assigned to each series is determined usingFitch's dual-party pay criteria and is based jointly on theunderlying rating assigned to those bonds by Fitch (currently rated'A+', with a Stable Outlook), and the support provided by theirrevocable direct-pay letters of credit (LOCs) issued by Citibank,N.A. (rated 'A+/F1+', both long and short-term ratings on RatingWatch Negative). The short-term 'F1+,' Rating Watch Negative ratingsare based solely on the LOCs. For information about the underlyingcredit rating see the press release dated Feb. 2, available at'fitchratings.com'.
Fitch's dual-party pay criteria consider the likelihood of thefailure of both a rated obligor and a bank LOC provider. Themethodology results in a long-term rating that is up to two notcheshigher than the stronger of the two credits if the followingconditions are met: (1) both entities have a rating of 'A' orhigher; (2) the transaction is structured such that payments fromboth the municipal issuer and the bank are in the flow of funds andboth entities would have to fail to perform before the bondsdefaulted; and (3) the credit of the bank and the rated obligor haveno more than a medium degree of correlation. Fitch has determined alow degree of correlation between Citibank and the obligor whichresults in a rating of 'AA', Rating Watch Negative for the bonds. Ifeither the underlying bond rating or the bank rating were downgradedto 'A-' or lower, the dual-party pay criteria could no longer beapplied, and the long-term rating assigned to the bonds would thenbe adjusted to the higher of the bank rating and the underlying bondrating.
The bank is obligated to make payments of principal of andinterest on the bonds upon maturity, acceleration and redemption, aswell as purchase price for tendered bonds. The ratings will expireupon the earliest of: (a) Feb. 28, 2014, the initial statedexpiration date of the LOCs, unless such date is extended; (b)conversion from the weekly rate mode; (c) any prior termination ofthe LOCs; and (d) defeasance of the bonds. The LOCs provide full andsufficient coverage of principal plus an amount equal to 52 days ofinterest at a maximum rate of 12 percent based on a year of 365 daysand purchase price for tendered bonds, while in the weekly ratemode. The Remarketing Agent for the bonds is CitiBank. The bonds areexpected to be delivered on or about March 2.
The bonds will initially bear interest at a weekly rate, but maybe converted to a daily or fixed rate. While bonds bear interest inthe weekly rate mode, interest payments are on the first Wednesdayof each month, commencing April 6. The trustee is obligated to maketimely draws on the LOCs to pay principal, interest, and purchaseprice. Funds drawn under the LOCs are held uninvested and are freefrom any lien prior to that of the bondholders. Holders may tendertheir bonds on any business day, provided the trustee andremarketing agent are given the requisite prior notice of thepurchase. The bonds are subject to mandatory tender: (1) uponconversion of the interest rate; (2) upon expiration, substitutionor termination of the LOCs; (3) on the tenth day (or the precedingbusiness day if such day is not a business day) following thetrustees' receipt of written notice from the bank of an event ofdefault under the reimbursement agreement, and (4) on the second dayfollowing the trustees' receipt of written notice from the bank thatthe interest component will not be reinstated directing suchmandatory tender. The bonds may also be accelerated followingtrustee's receipt of notice of an event of default under thereimbursement agreement. Optional and mandatory redemptionprovisions also apply to the bonds. There are no provisions for theissuance of additional bonds.
The Series 2011B bond proceeds are being used to refund the 2006bonds.
The Series 2011C bond proceeds are being used to finance the costof certain capital expenditures to be incurred by the corporationfor remodeling, constructing, acquiring and equipping of itinpatient, outpatient and administrative facilities.
Applicable Criteria and Related Research:
--'U.S. Municipal Structured Finance Rating Criteria', Aug. 16,2010;
--'Rating Guidelines for Letter of Credit-Supported Bonds', April29, 2009,
--'Dual-Party Pay Criteria for Long-Term Ratings on LOC-Supported U.S. Public Finance Bonds', June 11, 2009.
More Information:
www.fitchratings.com
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