Moody's Assigns A1/VMIG 1 Rating to Arizona Industrial Development Authority Senior Variable Rate Demand Multifamily Housing Revenue Bonds

Strategic Insights -

Moody's Investors Service has assigned an A1/VMIG 1 letter of credit backed rating to the Arizona Industrial Development Authority Senior Variable Rate Demand Multifamily Housing Revenue Bonds (Townhomes on Earley Project) Series 2025A. The bonds have a maximum principal amount of $62,000,000 and are secured by a letter of credit (LOC) provided by Barclays Bank PLC. The ratings are based on the direct-pay LOC, the structure and legal protections of the transaction, and Moody's evaluation of the credit quality of the Bank.

Key Takeaways:

  • The LOC is sized for $11,025,000, plus 48 days of interest at 15%, to cover the initial principal amount of the bonds and accrued interest.
  • The LOC provides sufficient coverage for the bonds while they are in the weekly and daily rate modes only.
  • The Trustee is instructed to draw on the LOC to receive sufficient funds for payment of the principal, purchase price, or interest on the bonds.
  • The bonds are subject to payment funded with a draw on the LOC in the event of mandatory tender or acceleration.
  • Factoring in potential upgrades and downgrades, the long-term CR Assessment of the Bank is A1(cr), and the short-term CR Assessment is P-1(cr).
  • The LOC terminates on July 1, 2028, unless terminated earlier in the event of an alternate LOC or an event of default under the reimbursement agreement.
  • Bondholders can optionally tender bonds in the weekly or daily interest rate mode by providing written notice to the trustee and remarketing agent.

Statistics:

  • Maximum principal amount of the bonds: $62,000,000
  • LOC size: $11,025,000, plus 48 days of interest at 15%
  • Interest rate modes: weekly, daily, and index
  • Bondholder tender notice deadlines: 4:00 p.m. for weekly rate mode and 11:00 a.m. for daily rate mode
  • LOC termination date: July 1, 2028

Sources:

  • Moody's Investors Service, "Moody's Ratings," dated February 10, 2023