Fitch Affirms Main Street Natural Gas (GA) Project Revs Ser 2006 A & B;
NEW YORK -- November 08, 2012
Fitch Ratings has affirmed the ratings on the following Main Street Natural
--$460 million gas revenue project bonds, series 2006 A at 'A+';
--$459.8 million gas revenue project bonds, series 2006 B at 'A'.
Fitch has also removed the series 2006 A bonds from Rating Watch Negative and
revised the Outlook to Stable. The removal from Watch Negative largely
reflects Fitch's Oct. 10, 2012 decision to affirm the long-term Issuer Default
Rating (IDR) of JPMorgan Chase & Co. (JPM)at 'A+' and to revise the Outlook on
all parent and subsidiary long-term ratings to Stable from Rating Watch
Negative. JPM is the series 2006 A transaction gas supplier guarantor.
The Outlook on the series 2006 B bonds is Stable.
The bonds are special obligations of the issuer, payable solely from revenues
and other funds pledged under each indenture. Revenues are derived from the
fulfillment of obligations from each of the transaction's varied
counterparties. Bondholders also rely on funds pledged under the indenture,
which are typically invested by a third party.
Given the structured nature of prepaid natural gas transactions and the
different components of pledged revenues, ratings generally reflect Fitch's
assessment of the relevant counterparties and structural enhancements. The
principal counterparties in the Main Street Natural Gas Series 2006 A & B
transactions include Merrill Lynch & Co. Inc. (ML; rated 'A' with a Stable
Outlook by Fitch), JPM(rated 'A+' with a Stable Outlook), Bank of Montreal
(rated 'AA-' with a Stable Outlook) and Royal Bank of Canada (rated 'AA' with
a Stable Outlook).
Gas purchase obligations reside with five southeastern municipal utilities -
the Municipal Gas Authority of Georgia (rated 'A+' with a Stable Outlook),
Patriots Energy Group, Southeast Alabama Gas District, the Municipal Electric
Authority of Georgia (rated 'A+' with a Stable Outlook) and the City of
LaGrange, Georgia - and are supported by Financial Security Assurance Inc.
KEY RATING DRIVERS
STABLE GAS SUPPLIER GUARANTORS: The gas supplier guarantors for the 2006 A and
B transactions exhibit solid and stable credit quality. In the series 2006 A
transaction, gas is supplied by J.P. Morgan Ventures Energy Corporation
(JPMVEC), whose obligations are guaranteed by JPM. In the series 2006 B
transaction, gas is supplied by Merrill Lynch Commodities, Inc. (MLCI), whose
obligations are guaranteed by ML.
MULTIPLE GAS PURCHASERS: In both transactions (series 2006 A & B) gas is
purchased by the five municipal utility participants, which exhibit varying,
but solid credit profiles that support the current ratings on the bonds.
NO RATING ENHANCEMENT: Fitch does not believe that the FSA surety bonds, that
provide payment in the event of a purchaser's failure to pay for delivered
gas, provide additional rating enhancement to the structure.
CASH FUNDED OPERATING RESERVES: Each transaction structure is enhanced by cash
funded operating reserves that are required to be maintained and may be used
to pay debt service if other funds are insufficient.
SOLID COMMODITY SWAP PROVIDERS: The commodity swap providers include Bank of
Montreal (Series 2006 A) and Royal Bank of Canada (Series 2006 A), and JPM
(Series 2006 B), all of which exhibit solid credit profiles.
INVESTMENT PROVIDER OBLIGATIONS COLLATERALZED: Credit Agricole is the debt
service fund guaranteed investment contract provider for both the Series 2006
A & B bonds. Credit Agricole's obligations under the contracts have been
WHAT COULD TRIGGER A RATING ACTION
CHANGE IN COUNTERPARTY CREDIT QUALITY: The long-term rating on the bonds will
continue to be determined by Fitch's assessment of the transaction structure,
the role of the counterparties in the structure, and their credit quality.
The proceeds of the Main Street bonds were used to prepay the gas suppliers
(JPMVEC and MLCI) for specified quantities of natural gas, deliverable to the
issuer over the 15-year life of the bonds. Bondholders rely on the suppliers
to deliver the gas or make cash payments to the issuer in lieu of delivery
over the life of the bonds.
The issuer, in turn, delivers the gas to the purchasing utilities. The
purchasing utilities are required to make payments to the issuer for the gas
delivered, which together with other payments, including those required under
the commodity swap agreements, are expected to be sufficient to meet debt
Should a supplier fail to deliver gas or pay an equivalent amount of money,
the supplier or its guarantor is required to make a termination payment to the
trustee that, together with other available funds, is sized to be sufficient
to redeem outstanding bonds.
Additional information is available at www.fitchratings.com. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.
In addition to the sources of information identified in Fitch's
Revenue-Supported Rating Criteria, U.S. Public Power Rating Criteria and
Criteria for Rating Prepaid Energy Transactions, this action was informed by
information from CreditScope.
Applicable Criteria and Related Research:
--'Revenue-Supported Rating Criteria' (June 12, 2012);
--'U.S. Public Power Rating Criteria' (Jan. 11, 2012);
--'Criteria for Rating Prepaid Energy Transactions' (Aug. 7, 2012);
--'Counterparty Criteria for Structured Finance Transactions' (May 30, 2012);
--'Prepay Gas Transactions: Focus on Counterparty Risk' (Feb. 23, 2009).
Applicable Criteria and Related Research:
Revenue-Supported Rating Criteria
U.S. Public Power Rating Criteria
Criteria for Rating Prepaid Energy Transactions
Counterparty Criteria for Structured Finance Transactions
Prepay Gas Transactions: Focus on Counterparty Risk
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
PUBLIC WEBSITE WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE.
Dennis M. Pidherny, +1-312-606-2337
One State Street Plaza
New York, NY 10004
Michael Murad, +1-312-606-2337
Alan Spen, +1-312-606-2337
Elizabeth Fogerty, +1-212-908-0526
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