Rating Action: Moody’s affirms VMIG 1 on Indiana’s Lease Approp. Bonds (Stadium Project), Series 2007A-3 and reinstates VMIG 1 on Lease Approp. Bonds (Stadium Project), Series 2005 A-5
New York, July 21, 2020 — Moody’s Investors Service has affirmed the VMIG 1 rating of the State of Indiana’s Lease Appropriation Bonds (Stadium Project), Series 2007A-3 Variable Rate Demand Securities issued through the Indiana Finance Authority (the Authority) in connection with amendments to the standby bond purchase agreement (SBPA) from U.S. Bank National Association (the Bank). We also reinstated the VMIG 1 rating on the state’s Lease Appropriation Bonds (Stadium Project), Series 2005 A-5 Variable Rate Demand Securities. The reinstatement is in conjunction with the conversion of the bonds to a daily rate mode from an index floating rate mode and the addition of a separate SBPA provided by the Bank on July 29th. The long-term rating on both series of bonds is Aa2. The state’s outlook is stable.
The VMIG 1 ratings on the bonds are derived from (i) the credit quality of the Bank as provider of liquidity support for the bonds in the form of SBPAs, (ii) the long-term rating of the bonds and (iii) Moody’s assessment of the likelihood of an early termination or suspension of the SBPAs without a mandatory tender. Events that would cause termination or suspension of the SBPAs without a mandatory purchase of the Bonds by the Bank are directly related to the credit quality of the bonds. The low likelihood of any such event occurring is reflected in the long-term rating assigned to the bonds.
Our short-term counterparty risk assessment (CR Assessment) of U.S. Bank National Association is P-1(cr).
The Bank may automatically terminate or suspend its payment obligation under the SBPAs (i) upon the bankruptcy or insolvency of the Authority; (ii) upon failure to pay when due any principal of, or interest on, the Bonds, the Bank Bonds or debt on parity with the Bonds or the Bank Bonds; (iii) if a final nonappealable judgment of at least $5,000,000 payable from the pledged revenues by the Authority remains unpaid, unstayed or undischarged for at least 60 days; (iv) if any provision of the SBPAs or the governing bond documents related to payment of principal of or interest on the Bonds, including Bank Bonds or all debt on parity with the Bonds, or the security for such debt, in each case ceases to be valid and binding on the Authority; (v) if the long-term ratings assigned to the Bonds or any parity debt are suspended or withdrawn for credit-related reasons or reduced below investment grade by each rating agency then rating the Bonds; (vi) if the State fails to make appropriations in the biennial budget in an amount sufficient to make all lease payments due under the lease; (vii) upon the dissolution or termination of the existence of the Authority; or (viii) upon the imposition by the Authority or a governmental authority with appropriate jurisdiction of a debt moratorium or other event that results in a restriction on repayment when due and payable of the principal or interest on the Bonds or all debt on parity with the Bonds.
In connection with the issuance of the SBPA the interest rate on the 2005 A bonds will be converted to bear interest in the daily rate mode and pay interest on the first business day of each month. The interest rate on the Bonds may be converted, in whole or part, to the weekly, index floating, flexible, long term, auction or fixed rate modes.
Upon any substitution of the liquidity facility the Bonds will be subject to mandatory tender on a substitution date. The Bonds are also subject to mandatory tender as follows: (i) upon conversion of the interest rate (other than between weekly and daily) ; (ii) on the 5th business day prior to the expiration or termination of the applicable SBPA; (iii) at the end of each long term or flexible rate period; and (iv) on a business day not less than 20 days and in no event later than the business day prior to the termination of the applicable SBPA resulting from the trustee’s receipt of notice from the Bank of an event of default under the SBPA.
Each SBPA covers the full principal amount of the Bonds outstanding plus 37 days of interest at 12%, the maximum rate applicable to the Bonds. The SBPAs are available to pay purchase price to the extent remarketing proceeds received are insufficient and provide sufficient coverage for the Bonds while in the daily and weekly rate modes.
Each SBPA commitment will terminate upon the earliest to occur of: (i) July 28, 2023, the scheduled expiration date; (ii) the date on which no Bonds remain outstanding or the available commitment has been reduced to zero; (iii) the close of the business day following conversion of the interest on all of the Bonds to a rate mode other than daily or weekly; (iv) the close of business on the 30th day following the trustee’s receipt of notice from the Bank of an event of default under the applicable SBPA; (v) the earlier of the date on which the Bank honors a drawing under the applicable SBPA in connection with substitution of the SBPA, or the business day following the date on which a substitute liquidity facility has been issued to replace the SBPA; and (vi) the date on which the available commitment under the applicable SBPA is automatically terminated.
Indiana is the 17th largest state in terms of population (6.7 million) and has the 19th largest economy, with nominal GDP of $382 billion in 2019.
The principal methodology used in these ratings was Variable Rate Instruments Supported by Conditional Liquidity Facilities published in March 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1057134. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
For further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.
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Joshua Grundleger Lead Analyst State Ratings Moody's Investors Service, Inc. 7 World Trade Center 250 Greenwich Street New York 10007 US JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Nicholas Samuels Additional Contact State Ratings JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653
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