Using Your Own Liquidity for Variable Rate Debt Liquidity Support: What Municipal Issuers Need to Know Nov 01

Standard & Poors, November 2001

Abstract
Standard & Poor's is receiving an increasing number of inquiries from issuers--including states, housing agencies, local governments, and not-for-for profit corporations--regarding the use of assets to provide liquidity support for variable-rate debt. Creditworthy issuers have expressed a desire to use internal assets as liquidity support for variable-rate debt (defined here as variable-rate demand obligations (VRDOs) and commercial paper (CP)) as a substitute for traditional bank liquidity facilities. These traditional facilities include bank lines and letters of credit (LOCs), and standby bond purchase agreements (SBPAs). Issuers have indicated to Standard & Poor's that bank liquidity facilities are often expensive and can be cumbersome to administer. In short, issuers are seeking cost-effective liquidity support alternatives to bank liquidity facilities. Can an issuer...

Companies mentioned in this report are: Massachusetts Inst of Tech,Merrill Lynch & Co. Inc.

Standard and Poors RatingsXpress Credit Research provides in-depth coverage of international corporates, financial institutions, insurance companies, utilities, sovereigns and structured finance programs. RatingsXpress Credit Research lets users determine the credit rating of holdings and identify key factors underlying an issuer's creditworthiness, distinguishes the different risk exposures for new and existing deals, and provides an understanding of how their analysts interpret key regulatory, political and environmental events and their economic impact.

Research Type: Commentary
Criteria articles describe the thought process and methodology Standard & Poor's analysts use in determining ratings. These commentary pieces discuss both the quantitative (economic and financial) and qualitative (business analysis and caliber of management) aspects of the analysis, as well as legal issues.

Massachusetts Inst of Tech,Merrill Lynch & Co. Inc.

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