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Tender Option Bonds

This presentation by Lisa Washburn, Managing Director of Public Finance, explores the derivation of a TOB rating and discusses recent trends in TOBs, including the use of joint default analysis and global scale ratings. Market feedback is encouraged.

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Tender Option Bonds

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  1. Tender Option Bonds Presented by: Lisa WashburnTeam Managing Director Public Finance

  2. Derivation of a TOB Rating • Generally, the long-term rating of the deposited asset equals the long-term rating of the TOB • Short-term rating is based on the short-term credit quality of the liquidity provider and the likelihood of the termination of the liquidity facility • Until recently, immediate termination events linked to the issuer of the bond or, if insured, the insurer • Now most programs have amended immediate termination events to link to both the issuer and if an insurer is present the insurer

  3. Short-term Demand Obligation Rating Transition Short-term demand obligation rating transition for ratings linked to Financial Guarantors… Short-term demand obligation rating transition for ratings linked to Municipal Issuers… TOBs with immediate termination events linked to both the insurer and the issuer will be assigned the higher short-term rating

  4. Recent Trends in TOBs • Amending the immediate termination events • Use of auction rate assets • Deposit of enhanced custodial receipts into TOBs

  5. Market Feedback • There are a lot of ideas and suggestions on how to approach the rating of TOBs • Use of Joint Default Analysis • Use of Global Scale Ratings • Moody’s continues to solicit and evaluate market feedback from all market participants on these topics • We continue to welcome your thoughts

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