Rating Action: Moody's affirms VMIG 1 on the City of Raleigh, NC's Variable Rate COPs (Downtown Improvement Projects), Series 2005B-1
Global Credit Research - 05 Jan 2021
New York, January 05, 2021 -- Moody's Investors Service has affirmed the VMIG 1 rating of the City of Raleigh, North Carolina's Variable Rate Certificates of Participation (Downtown Improvement Projects), Series 2005B-1 (Certificates) in connection with the issuance of a substitute standby bond purchase agreement (SBPA) from PNC Bank, N.A. (the Bank).
RATINGS RATIONALE
The affirmation of the VMIG 1 rating is based upon (i) the credit quality of the Bank as provider of liquidity support for the Certificates in the form of a SBPA, (ii) the long-term rating of the Certificates, and (ii) Moody's assessment of the likelihood of termination or suspension of the SBPA without a mandatory tender. Events that would cause termination or suspension of the SBPA without a mandatory purchase of the Certificates by the Bank are directly related to the credit quality of the Certificates. Accordingly, the likelihood of any such event occurring is reflected in the long-term rating assigned to the Certificates. Moody's long term rating of the Certificates is Aa2.
Our current short-term Counterparty Risk (CR) Assessment of PNC Bank, N.A. is P-1(cr).
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING
- Short-term rating: Not applicable
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING
- Short-term rating: Moody's downgrades the short-term CR Assessment of the Bank, or a multi-notch downgrade the long-term rating of the Certificates.
LEGAL SECURITY
The Bank may automatically terminate or suspend its obligations to purchase the Certificates under the SBPA: (1) upon the bankruptcy or insolvency of the City; (2) if the City fails to pay when due regularly scheduled principal of or interest on the Certificates or on any other debt of the City on parity with the Certificates; (3) if the SBPA, the Trust Agreement, the Certificates, the Financing Agreement or Certificates issued under the Trust Agreement on parity with the Certificates ("Parity Certificates") or any provision in such document relating to the payment of principal of or interest on the Certificates or the Parity Certificates, or the security for the Certificates ceases to be valid and binding, or is repudiated by the City; (4) with respect to any principal of and interest on the Certificates or any Parity Certificates, (a) if the City council fails to budget and appropriate in its budget for any fiscal year moneys sufficient to pay all principal and interest coming due in such fiscal year; or (b) if the City council deletes from its duly adopted budget any appropriations made as specified in clause (a) above; (5) if each rating agency rating the Certificates downgrades to below investment grade, suspends or withdraws the rating of the Certificates or debt of the City on parity with the Certificates; or (6) if a final non-appealable judgment or order for the payment of money in excess of $25,000,000 (or two or more such judgments in excess of $50,000,000) remains unsatisfied or unstayed for a period of 180 days.
The Certificates will continue to bear interest in the weekly rate mode and pay interest on each February 1 and August 1. The interest rate on the Certificates may be converted, in whole, to the daily mode, bond interest term mode, or the long term mode
Upon any substitution of the liquidity facility the Certificates will be subject to mandatory tender. The Certificates are also subject to mandatory tender as follows: (i) upon conversion of the interest rate; (ii) on a business day at least five days prior to the expiration or cancellation of the SBPA; (iii) at the end of each bond interest term rate; and (iv) on a business day at least five days prior to the termination of the SBPA resulting from the trustee's receipt of notice from the Bank of an event of default under the SBPA.
The SBPA covers the full principal amount of the Certificates outstanding plus 186 days of interest at 12%, the maximum rate applicable to the Certificates. The SBPA is available to pay purchase price to the extent remarketing proceeds received are insufficient and provides sufficient coverage for the Certificates while in the daily and weekly rate modes.
The SBPA will terminate upon the earliest of: (i) the expiration date of the SBPA, (March 1, 2023); (ii) the date on which no Certificates eligible to be purchased under the SBPA are outstanding; (iii) the business day following the substitution date of the liquidity facility; (iv) the business day following conversion of the Certificates to a rate mode other than the weekly or daily rate modes; (v) the 30th day following the trustee and tender agent's receipt of notice of termination of the SBPA as a result of an event of default under the SBPA; or (vi) upon an immediate termination of the SBPA.
PROFILE
The City of Raleigh is the county seat of Wake County (Aaa stable) and the state capital, located in the Piedmont region of central North Carolina (Aaa stable). The city forms one point of the Research Triangle Park, along with Chapel Hill (Aaa stable) and the City of Durham (Aaa stable).
METHODOLOGY
The principal methodology used in this rating 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.
REGULATORY DISCLOSURES
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 rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure.
This rating is 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_1243406.
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.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Lauren Von Bargen Lead Analyst Regional PFG Northeast 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 Tatiana Killen Additional Contact PF General Administration 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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