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

Commercial Paper, VRDO, And Self-Liquiditymaturity, and the greater the volatility and marketrisk of the assets, then the higher the coveragerequirement such as 1.50 for investment grade corporatenotes becomes. Logically, the reverse holds true.As the asset’s weighted average maturity and marketrisk declines and credit quality increases, the lowerthe asset coverage requirement. Generally,Standard & Poor’s will discount U.S. Treasury debtobligations and highly rated money market funds at aratio of 1:10 and will apply higher discount ratios of1:20 and above for all other securities.The discount ratio is also a function of how frequentlyan issuer plans to have assets valued in themarket. While monthly valuations for high qualityassets such as U.S. Treasuries may be adequate,daily or weekly valuations are recommended forSample Liquidation LetterStandard & Poor’s CorporationPublic Finance Department55 Water StreetNew York, New York 10041Dear Standard & Poor's,In connection with the $xx million “Issuer” variable-rate demand obligation bonds series 200x, “Issuer” (the “Guarantor”) is guaranteeingthe payment of the purchase price of any of these bonds that are tendered for purchase and not remarketed. The Guarantor hasrequested that Standard & Poor’s provide its short-term ratings for these bonds, as based on the credit and liquidity of the Guarantor.The purpose of this letter (“Liquidation Letter”) is (i) to specify the available sources of the Guarantor for payment of purchase price onthe bonds in the event of a failed remarketing; (ii) to provide contact information for officials of the Guarantor responsible for activatingprocedures to provide required funding to the Transfer Agent or Trustee to cover the purchase price of bonds subject to a failedremarketing, and (iii) to outline specific procedures that would be followed in the event of a failed remarketing.Sources “Issuer” as Guarantor would have available in the event of a failed remarketing on the bonds.As summarized below, the “Issuer” has a number of potential sources of funds in which, as Guarantor on the bonds, it would accessin order to respond to a failed remarketing event for the bonds. In the event of a failed remarketing, the “Issuer” would access thesource of funds most favorable to it at the time of any failed remarketing. Among the sources of funds available to the “Issuer” arethe following:■ Liquidation of General Fund investments: The “Issuer” could elect to liquidate investments held in its General Fund in order to meetany failed remarketing funding requirement on the bonds. At Dec. 31, 2000, the General Fund approximated $1.3 billion in value andconsisted of a diversified portfolio of publicly traded equity and fixed-income investments in addition to illiquid alternative investments.The “Issuer” maintains cash and liquid assets at [NAME OF CUSTODIAL BANK], which acts as our custodial bank for all“Issuer” investments not held by a bond trustee or invested in an external commingled pool. Four senior staff the within Treasurydepartment plus the “Issuer’s” chief financial officer are authorized to direct [NAME OF CUSTODIAL BANK] in securities transactionsand/or the wiring of funds.■ Use of reverse repos: Rather than actually sell investments of our General Fund in the event of a failed remarketing on the bonds,the “Issuer” would most likely set up a reverse repo of government or agency securities from its investment funds in order to raisecash in the short term. The “Issuer” has completed reverse repos from time to time over the past few years and has agreementsin place to do them again, if necessary. Four senior staff within the Treasury department are authorized to initiate reverse repotransactions with our banks.The “Issuer” agrees to notify Standard & Poor’s in the future if these sources of potential funding are unavailable to meet any failedremarketing of the bonds, or if new funds or sources of liquidity are substituted as sources to meet the funding of the purchase priceon the bonds in the event of a failed remarketing.Principal officials of the Guarantor responsible for meeting failed remarketing funding requirements of the bonds.[NAMES][E-MAIL ADDRESSES][TELEPHONE NUMBERS][FAX NUMBERS]Summary of specific procedures in the event of a failed remarketing.The bonds may be remarketed by the Remarketing Agent in a number of potential modes ranging from one day to seven days, toa short-term period of any number of days up to 180 days under which there are optional or mandatory tender provisions for thebondholder that would require purchase of the bonds by the Guarantor in the event of a failed remarketing of the bonds. Summarizedbelow are the specified procedures for the meeting the funding requirements of a failed remarketing of the bonds under various modes:www.standardandpoors.com23