New York, March 29, 2023 — Moody’s Investors Service (Moody’s) has assigned a Aa1 enhanced rating to the following:
Custodial Receipts (TD Bank), Custodial Receipts, Series 2023-6 evidencing beneficial ownership of Lehigh Valley Health Network, PA Hospital Revenue Bonds, Series A of 2019
Custodial Receipts (TD Bank), Custodial Receipts, Series 2023-7 evidencing beneficial ownership of Miami-Dade (County of) FL Port Facility Seaport Revenue Refunding Bonds, Series 2022A (AMT)
Custodial Receipts (TD Bank), Custodial Receipts, Series 2023-8 evidencing beneficial ownership of Denver (City & County of) CO Airport Ent. Airport System Subordinate Revenue Bonds, Series 2018A (AMT)
Custodial Receipts (TD Bank), Custodial Receipts, Series 2023-10 evidencing beneficial ownership of San Diego County Regional Airport Auth., CA Subordinate Airport Revenue Bonds, Series 2021B (Private Activity/AMT)
RATINGS RATIONALE
The rating is based upon joint default analysis (JDA), which reflects Moody’s approach to rating jointly supported transactions. The JDA rating is based on the long-term Counterparty Risk (CR) Assessment Aa2(cr) of The Toronto-Dominion Bank (the Bank) as provider of the standby Letter of Credit (LOC), the underlying rating of the bonds, and the structure and legal protections of the transaction which provide for timely payment of debt service to the Custodial Receipts holders. Moody’s underlying rating on the bonds is as follows:
A2 – Lehigh Valley Health Network, PA Hospital Revenue Bonds, Series A of 2019
A3 – Miami-Dade (County of) FL Port Facility Seaport Revenue Refunding Bonds, Series 2022A (AMT)
A1 – Denver (City & County of) CO Airport Ent. Airport System Subordinate Revenue Bonds, Series 2018A (AMT)
A2 – San Diego County Regional Airport Auth., CA Subordinate Airport Revenue Bonds, Series 2021B (Private Activity/AMT)
Since a payment default on the Custodial Receipts would occur only if both the Bank and the obligor of the bonds default on bond principal and interest payment dates, Moody’s has assigned the rating 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 support provider and each obligor. In this case, Moody’s has determined that there is a low level of default dependence between the Bank and each obligor which results in a long-term JDA rating of Aa1 on the Custodial Receipts.
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS
Moody’s upgrades either the long-term CR Assessment of the Bank or the long-term underlying rating of the bonds.
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS
Moody’s downgrades either the long-term CR Assessment of the Bank or the long-term underlying rating of the bonds.
Moody’s determines that the default dependence between an obligor and the Bank increased.
The Custodial Receipts pay interest on the same date on which interest is paid on the bonds in an amount equal to the interest paid on the bonds minus applicable fees, if any. Each LOC covers amounts due on the related Custodial Receipts on any bond payment date to the extent that such amounts are not received by the custodian from the bonds. The LOC provider is also obligated to pay principal and interest due on the Custodial Receipts upon any mandatory redemption of the Custodial Receipts.
Interest and principal payments to Custodial Receipt holders are paid first from interest and principal payments on the bonds. In the event of a bankruptcy filing of the obligor of the bonds, the custodian shall draw on the LOC for an amount equal to the amount of principal and/or interest paid by the obligor on the bonds during the 124-day period prior to such filing. Such amounts shall be held by the custodian in the preference account and shall be available in the event any such payments of principal and/or interest are subsequently avoided as preference payments. The amounts advanced to cover potential preference will be held to the earlier of (i) the date on which an order is received that payments to the Custodial Receipt holders must be returned as a result of the bankruptcy proceeding in which case the custodian shall pay over from the preference account an amount equal to any payments of principal and interest on the bonds required to be returned; (ii) the date on which an order is received that no such preference payments will be required to be returned or (iii) the date on which notice has been received by the custodian that such bankruptcy proceeding is closed or dismissed and such dismissal or closure cannot be appealed in which case the funds in the preference account shall be returned to the Bank.
Each LOC is sized for the full principal amount of the bonds plus 309 days’ days of interest at the bond rate, which will provide sufficient principal and interest coverage for the Custodial Receipts. Draws for interest shall be automatically reinstated effective upon the date of any interest drawing.
Substitution of the LOCs are permitted subject to certain conditions, including the receipt by the custodian of written notice from each rating agency then rating the Custodial Receipts that such substitute credit enhancement shall not result in the reduction or withdrawal of the then current ratings on the Custodial Receipts.
The Custodial Receipts are subject to mandatory redemption on the business day prior to the Termination Date of the applicable LOC. The Termination Date shall mean the earliest of (A) the Expiration Date, March 15, 2024, (B) the 45th day following the custodian’s receipt of notice from the Bank that the rating on the applicable bonds have been downgraded below Baa1; or (C) the fifth Business Day following; (i) the date the custodian receives notice from the Bank that the Bank has not, for any reason whatsoever, been reimbursed in full, together with interest, for the amount of any drawing on the LOC, or that any other amount referred to in the Custody Agreement as being payable to the Bank has not been paid and satisfied in full, which amount has remained unpaid or unsatisfied for five Business Days, (ii) the date the custodian receives notice from the Bank that an event of default relating to the bonds has occurred and is continuing, (iii) the date the custodian receives notice from the Bank that the Bank is not or would not be in compliance with the Dodd Frank Wall Street Reform and Consumer Protection Act and the rules promulgated thereunder as a consequence, in whole or in part, of providing the LOC, (iv) the date the LOC is surrendered to the Bank by the custodian for cancellation, or (v) the date the Bank receives written notice from the custodian that the Custody Agreement has terminated; provided, however, if the Bank fails to pay the mandatory redemption price of the Custodial Receipts subject to mandatory redemption on the date such payment is due, the Termination Date shall automatically, and without further action, be extended for 31 calendar days.
On any mandatory redemption date, if the Bank fails to pay the mandatory redemption, then such mandatory redemption shall be canceled, and the LOC shall remain in effect. The Custodial Receipts will remain outstanding supported by the applicable underlying bonds and the LOC. The Custodial Receipts are subject to redemption upon redemption of the bonds.
In the event of a payment default by the Bank following a draw for principal and or interest on a bond payment date, the custodian shall distribute the bonds held by the custodian to the applicable holders of the related Custodial Receipts. Upon the distribution of the bonds, the Custodial Receipts shall be treated as if they were surrendered for cancellation.
The principal methodology used in these ratings was Tender Option Bonds and Related Instruments published in February 2018 and available at https://ratings.moodys.com/api/rmc-documents/63933. An additional methodology used in these ratings Guarantees, Letters of Credit and Other Forms of Credit Substitution Methodology published in July 2022 and available at https://ratings.moodys.com/api/rmc-documents/386295. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of these methodologies.
REGULATORY DISCLOSURES
For further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.
Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.
Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.
Michael J. Loughlin
Vice President – Senior Analyst
Public Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Eva Bogaty
Associate Managing Director
Public Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Source: moodys.com
