S&P - Public Finance Criteria (2007). - The Global Clearinghouse

Municipal Structured Financeagainst the escrow fund and waives any rights itmay have to enforce the obligations of the issuerto the FPC provider from any amounts or securitieson deposit with the escrow agent. Any damagesdue to the FPC provider or any transfereemay be paid from amounts on deposit in theescrow fund only after all bondholders have beenpaid in full.■ Amendments to the escrow agreement or the FPCshould be subject to Standard & Poor’s confirmationthat such actions will not adversely affect thethen current rating on the bonds.■ If the FPC provider transfers the FPC, confirmationshould be requested from Standard & Poor’sthat such transfer would not adversely affect thethen current rating on the bonds.■ The FPC provider may not deliver “partial interests”in securities—securities jointly owned bythe seller and the escrow agent. The new securitiesshould be held by the escrow agent under theescrow and mature on or before the date that theescrow agent needs funds to make debt servicepayments on the bonds. Standard & Poor’s doesnot assume that the market value of the newsecurities, if liquidated prior to their maturity,will be sufficient to pay debt service.■ The escrow agreement should provide that if theparties enter into a FPC subsequent to the datethat Standard & Poor’s rated the escrowed bonds,the escrow agent receives written evidence fromStandard & Poor’s that the FPC will not adverselyaffect the then current rating on the bonds.Legal opinionsTo ensure that the escrow funds will be availableto pay debt service on the defeased obligations,Standard & Poor’s requires that in addition to theopinions required in the defeasance criteria, thefollowing opinions be delivered in connection witha FPC:1. An opinion of counsel to the effect that, if theFPC provider becomes insolvent, the escrow funds(including the newly delivered securities) and paymentson the bonds would not be recoverable as apreference by the debtor in possession, trustee,receiver, or other conservator or liquidator of theFPC provider.2. An opinion of counsel to the effect that, in aninsolvency of the FPC provider, the escrow funds(including the newly delivered securities) and anypayments made from it would not be subject to theautomatic stay or any stay imposed by a conservator,receiver, or liquidator of the seller (and, ifapplicable, that the agreement satisfies the requirementsof Section 13 (e) of the Federal DepositInsurance Act).3. An opinion of counsel to the effect that, in theevent of the insolvency of the FPC provider, theescrow funds, including the newly delivered securities,and all proceeds thereon would not be consideredpart of the FPC provider’s assets available forliquidation by any trustee, conservator, receiver orliquidator to the FPC provider’s creditors.For example:■ FPC providers that are subject to the BankruptcyCode: the opinions should address items 1-3 andinclude references to Sections 362(a), 541, and547 of the Bankruptcy Code.■ FPC providers that are FDIC insured: the opinionshould address items 1-3 as reflected in the provisionsof FIRREA and the Federal DepositInsurance Act (FDIA).■ FPC providers that are not FDIC insured or subjectto the Bankruptcy Code: the opinion shouldaddress items 1-3 as reflected by the relevantstate and foreign, if applicable, regulatory provisions.4. If the FPC is entered into subsequent to thecreation of the escrow:■ Confirmatory opinion stating that the opinionsset forth in legal defeasance opinion and the taxopinions rendered at the closing of the escrowagreement are not affected by the execution,delivery, and performance of the FPC; and■ An opinion to the effect that the execution, delivery,and performance of the FPC is legal, valid,binding, and enforceable and does not require theconsent of the bondholders. ■224 Standard & Poor’s Public Finance Criteria 2007