NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assigns a rating of 'AA+/F1', Stable Outlook to the $300,000,000 Pennsylvania Economic Development Financing Authority (the authority) unemployment compensation variable rate demand revenue bonds, series 2012C.
The long-term 'AA+' rating is based on the higher of the underlying 'AA+', Stable Outlook long-term rating that Fitch assigns to the bonds, and the support of the irrevocable direct-pay letter of credit (LOC) issued by PNC Bank, N.A. (rated 'A+/F1', Stable Outlook) securing the bonds. The short-term 'F1' rating is based solely on the LOC supporting the bonds. For information about the underlying credit rating, see Fitch's press release 'Fitch Rates Pennsylvania's $2.9B Unemployment Compensation Revenue Bonds 'AA+'; Outlook Stable' dated Sept. 14, 2012 and available at 'www.fitchratings.com'.
The bank is obligated to make regularly scheduled payments of principal of 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) Oct. 1, 2015, the stated expiration date of the LOC, unless such date is extended; (b) conversion to an interest rate other than the weekly rate; (c) any prior termination of the LOC; and (d) defeasance of the bonds. The LOC provides full and sufficient coverage of principal plus an amount equal to 264 days of interest at a maximum rate of 12% based on a year of 365 days for the period from October 18, 2012 to but not including July 1, 2013, and an amount equal to 192 days of interest at a maximum rate of 12% based on a year of 365 days for the period from July 1, 2013 to and including October 1, 2015 and purchase price for tendered bonds while in the weekly rate mode. The Remarketing Agent for the bonds is PNC Capital Markets LLC. The bonds are expected to be delivered on or about Oct. 18, 2012.
The bonds initially bear interest at a weekly rate but may be converted to a daily, windows interest rate, short-term, or long-term interest rate. While bonds are in the weekly rate mode, interest payments are Jan. 1 and July 1, commencing July 1, 2013. The trustee is obligated to make timely draws on the LOC to pay principal, interest, and purchase price. Funds drawn under the LOC are held uninvested and are free from any lien prior to that of the bondholders.
Holders of the bonds may tender their bonds on any business day, provided the tender agent is given the requisite prior notice of the purchase. The bonds are subject to mandatory tender: (1) upon conversion of the interest rate; (2) upon expiration, substitution or termination of the LOC; (3) on the fourth business day following the bank's default in its obligation to provide money to purchase any tendered bond when due; and (4) on the fourth business day following trustee's receipt of notice from the bank of an event of default under the reimbursement agreement and direction to cause a mandatory tender. Optional and mandatory redemption provisions apply to the bonds. Additional bonds may be issued to refund the series 2012C bonds provided they receive a separate series designation.
Bond proceeds will be loaned by the authority to the Pennsylvania Department of Labor and Industry and used to: (i) refund the authority's interim revenue note series 2012; (ii) make a deposit to the Bond Reserve Fund, and (iii) pay costs of issuance.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'U.S. Municipal Structured Finance Criteria', Feb. 28, 2012;
--'Rating Guidelines for Letter of Credit-Supported Bonds', June 20, 2012.
Applicable Criteria and Related Research:
U.S. Municipal Structured Finance Criteria
Rating Guidelines for Letter of Credit-Supported Bonds
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Source: Fitch Ratings