Fitch Rates New York City Adj. Rate GO Bonds 2017 Ser. A, Subseries A-5 and A-6 'AA/F1+'
KEY RATING DRIVERS:
The 'AA' long-term ratings and Stable Outlook are based on the credit quality of the City of New York. The 'F1+' short-term ratings are based on the liquidity support, in the form of two separate standby bond purchase agreements (SBPAs), provided by Landesbank Hessen-Thuringen Girozentrale, acting through its New York Branch, (Helaba, rated 'A+/F1+'/Stable Outlook).
Each SBPA is sized to cover the payment of the principal component of purchase price plus an amount equal to 35 days of interest calculated at a maximum rate of 9% based on a 365-day year which is sufficient for tendered bonds in the daily, weekly and two-day rate modes in the event that the proceeds of a remarketing of the bonds are insufficient to pay the purchase price following a mandatory or optional tender. Each SBPA will expire upon the earliest of: Aug. 17, 2021, the scheduled expiration date of the SBPAs, unless such dates are extended; conversion of all the bonds to an interest rate mode other than the daily, weekly or the two-day rate mode; substitution of the SBPA; or upon the occurrence of certain other events of default which result in a mandatory tender or other termination events related to the credit of New York City which result in an automatic and immediate termination. The remarketing agent for the subseries A-5 is Jefferies LLC and subseries A-6 bonds is Stern Brothers & Co. The bonds are expected to be delivered on or about Aug. 18, 2016.
The bonds will be issued in the daily rate mode, but may be converted to a weekly, two-day, commercial paper, indexed, term, stepped coupon, auction or fixed rate. While bonds bear interest in the daily rate mode, interest is paid on the first business day of each month, commencing Sept. 1, 2016. Holders of bonds bearing interest in the daily, two-day and weekly rate modes may tender their bonds for purchase with the requisite prior notice. The tender agent is obligated to make timely draws on the SBPAs to pay purchase price in the event of insufficient remarketing proceeds, and in connection with the expiration or termination of the SBPAs, except in the case of the credit-related events permitting immediate termination or suspension of the SBPAs.
Funds drawn under the SBPAs are held uninvested and are free from any lien prior to that of the bondholders. The bonds are subject to mandatory tender: (1) upon conversion of the interest rate other than a conversion in whole between the daily, two-day and weekly rate; (2) upon expiration, substitution (unless rating confirmation has been obtained) or termination of the SBPA; and (3) following the receipt of written notice from the bank of an event of default under the respective SBPA, directing such mandatory tender. Optional and mandatory redemption provisions also apply to the bonds.
Bond proceeds will be used to finance capital projects for the city. For more information on the long-term rating, see Fitch's press release dated July 28, 2016, "Fitch Rates New York City's $1.1B GOs 'AA'; Outlook Stable," available on Fitch's website at 'www. fitchratings. com'.
The short-term rating reflects the short-term rating that Fitch maintains on the bank providing liquidity support and will be adjusted upward or downward in conjunction with the short-term rating of the bank and, in some cases, the long-term rating of the bonds. The long-term rating is exclusively tied to the creditworthiness of the bonds and will reflect all changes to that rating.