Moody's Assigns Aaa Rating to The Health and Educational Facilities Board of The Metropolitan Government of Nashville and Davidson County, Tennessee Multifamily Tax-Exempt Bonds (MBS Secured) (Trinity Flats Apartments) Series 2024A

Strategic Insights -

Moody's Investors Service has assigned a Aaa rating to the proposed $32,480,000 The Health and Educational Facilities Board of The Metropolitan Government of Nashville and Davidson County, Tennessee Multifamily Tax-Exempt Bonds (MBS Secured) (Trinity Flats Apartments) Series 2024A. The rating is based on the high credit quality of the Federal National Mortgage Association (FNMA, Aaa negative) mortgage-backed security (MBS) and strong legal structure where principal and interest are passed through to bondholders semiannually. Fannie Mae is providing a forward commitment to guaranty the permanent financing by issuing the MBS after the construction phase is complete.

The structure of the transaction reduces the potential for administrative error by the Trustee. One very important mitigant to administrative risk is that on each MBS payment date there is a positive net revenue and a build-up of funds in the revenue account that cannot be released from the trust unless those payments are clearly limited to investment earnings that were not included in the original cash flow projections for the transaction. The bonds are expected to be delivered in May, 2025 and will bear interest at a fixed rate.

Key Takeaways:

  • Moody's assigned a Aaa rating to the proposed $32,480,000 The Health and Educational Facilities Board of The Metropolitan Government of Nashville and Davidson County, Tennessee Multifamily Tax-Exempt Bonds (MBS Secured) (Trinity Flats Apartments) Series 2024A.
  • The rating is based on the high credit quality of the Federal National Mortgage Association (FNMA, Aaa negative) mortgage-backed security (MBS) and strong legal structure.
  • Fannie Mae is providing a forward commitment to guaranty the permanent financing by issuing the MBS after the construction phase is complete.
  • The structure of the transaction reduces the potential for administrative error by the Trustee.
  • Cash flow projections demonstrate that total trustee-held monies in the Series A revenue fund account, Series A bond proceeds fund account, Series A negative arbitrage subaccount, and Series A collateral fund account, including investment earnings, will be sufficient for full and timely debt service payments.
  • The bonds are expected to be delivered in May, 2025, and will bear interest at a fixed rate.
  • The rating methodology used in this rating was US Standalone Housing Bonds Secured by Credit-Enhanced Mortgages, published in October 2024.
  • An additional methodology used in this rating was US Pre-refunded and Escrow-backed Transactions, published in October 2024.

Statistics:

  • The proposed bond issuance is for $32,480,000.
  • The bond rating is Aaa.
  • The rating is based on the high credit quality of the Federal National Mortgage Association (FNMA, Aaa negative) mortgage-backed security (MBS) and strong legal structure.
  • The bonds are expected to be delivered in May, 2025.
  • The bond rating has a fixed interest rate.

Sources:

  • Moody's Ratings: https://ratings.moodys.com/rmc-documents/430702 (US Standalone Housing Bonds Secured by Credit-Enhanced Mortgages)
  • Moody's Ratings: https://ratings.moodys.com/rmc-documents/430703 (US Pre-refunded and Escrow-backed Transactions)
  • Moody's Ratings: https://ratings.moodys.com/rmc-documents/430704 (The Health and Educational Facilities Board of The Metropolitan Government of Nashville and Davidson County, Tennessee Multifamily Tax-Exempt Bonds (MBS Secured) (Trinity Flats Apartments) Series 2024A)