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Moody's Assigns A3 Rating to Main Street Natural Gas, Inc. Gas Supply Revenue Bonds

Strategic Insights

— 2 min read

Moody's Investors Service has assigned an A3 rating to Main Street Natural Gas, Inc.'s Gas Supply Revenue Bonds, Series 2022B, due to the credit quality of its guarantor, Citigroup Inc., and the structure of the transaction, which provides for the payment of debt service consistent with the rating assigned to the bonds. The rating also takes into account the credit quality of Citibank, N.A. and the provider of the investment agreement, if any. The bond proceeds will be used to prepay the Gas Supplier for the delivery of natural gas over a 30-year period.

Key Takeaways:

  • The A3 rating assigned to the Main Street Natural Gas, Inc. Gas Supply Revenue Bonds, Series 2022B is based on the credit quality of Citigroup Inc. (A3) as guarantor for payments due under the Prepaid Natural Gas Purchase and Sale Agreement and the Back-End Commodity Swap.
  • The rating also considers the credit quality of Citibank, N.A. (Aa3) as provider of the Funding Agreement and the structure of the transaction, which provides for the payment of debt service consistent with the rating assigned to the bonds.
  • The bond proceeds will be used to prepay the Gas Supplier (Citi Prepaid Energy, LLC) for the delivery of a specified quantity of natural gas over a 30-year period.
  • The Issuer will sell gas acquired under the Prepaid Natural Gas Purchase and Sale Agreement to the Municipal Gas Authority of Georgia under a Natural Gas Supply Agreement.
  • The Bonds will bear interest at a fixed rate for an initial long-term rate period, with the initial long-term rate period expected to end on May 31, 2030, and mandatory tender on the business day following such date.
  • The rating terminates upon the mandatory purchase date at the end of the initial long-term rate period, following which the Issuer will sell gas acquired under the Prepaid Natural Gas Purchase and Sale Agreement to the Municipal Gas Authority of Georgia under a Natural Gas Supply Agreement.
  • Automatic triggering events under the GPA include bankruptcy of the Gas Supplier, failure of the Gas Supplier to make a required payment under the GPA, and failure of the Issuer to replace the commodity swap or CPE to replace the Back-End Commodity Swap within 120 days.
  • If an Automatic Triggering Event or termination of the GPA occurs, the GPA will terminate as of the Early Termination Date, and the Gas Supplier will make the Liquidation Payment, which is sufficient to redeem the Bonds at the amortized value of the Bonds.

Statistics:

  • The bonds have an A3 rating, assigned by Moody's Investors Service.
  • The initial long-term rate period is expected to end on May 31, 2030.
  • The bonds will bear interest at a fixed rate for an initial long-term rate period.
  • The rating terminates upon the mandatory purchase date at the end of the initial long-term rate period.
  • The Gas Supplier will make the Liquidation Payment, which is sufficient to redeem the Bonds at the amortized value of the Bonds, in the event of an Automatic Triggering Event or termination of the GPA.

Sources:

  • Moody's Investors Service (No date). "Rating Action: Moody's assigns A3 rating to Main Street Natural Gas, Inc. Gas Supply Revenue Bonds, Series 2022B." Rating Announcement.
  • Moody's Investors Service (July 2019). "US Gas Prepayment Bonds Methodology." URL: https://ratings.moodys.com/api/rmc-documents/60900.
  • Moody's Investors Service. (No date). "Rating Methodologies." URL: https://ratings.moodys.com.

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