Moody’s Investors Service has upgraded to Aa3/VMIG 1 from Baa1/VMIG 3 the ratings of the Harris County Cultural Education Facilities Finance Corporation Revenue Bonds (Young Men’s Christian Association of the Greater Houston Area), Series 2008B (the “Bonds”) in conjunction with the substitution of the current letter of credit securing the Bonds provided by Allied Irish Banks, p.l.c. with a letter of credit to be provided for by Bank of America, National Association (the “Bank”).
Upon the substitution of the letter of credit, currently scheduled for April 20, 2011, the long term rating will be based on joint default analysis (“JDA”) and will reflect Moody’s approach to rating jointly supported transactions. The JDA rating is based upon the long-term rating of the Bank as provider of the letter of credit; the underlying rating assigned to the Bonds; and the structure and legal protections of the transaction which ensures timely debt service payments to investors. The timely payment of purchase price is reflected in the short-term rating of the Bonds. The short term rating is based on the short term rating of the Bank. Bank of America, N.A. is currently rated Aa3 for long-term other senior obligations (OSO) and Prime-1 for short-term OSO. Moody’s currently maintains an underlying rating of Baa2 on the Bonds.
Since a loss to investors would occur only if the Bank providing the letter of credit and the YMCA of the Greater Houston Area (“YMCA”) default in payment, Moody’s has assigned ratings based upon the joint probability of default by both parties. In determining the joint probability of default, Moody’s considers the level of default dependence between the Bank and the YMCA. Moody’s has determined that there is a high level of default dependence between the Bank and the YMCA.
