Fitch to Rate Iowa Fin Auth VRDBs (Five Star Holdings Proj), Ser 2007 'AA-/F1+'; Outlook Stable

On the effective date of Sept. 23, 2014, Fitch Ratings will assign an 'AA-/F1+', Stable Outlook rating to the $5,300,000 Iowa Finance Authority variable rate demand solid waste disposal waste revenue bonds (Five Star Holdings, LLC Project), series 2007.

KEY RATING DRIVERS

The rating is based on the support provided by an irrevocable direct-pay confirming letter of credit (CLOC) issued by Agribank, FCB (rated 'AA-/F1+', Stable Outlook), which confirms an irrevocable direct-pay letter of credit (LOC) issued by Farm Credit Services of America, FLCA, which is not rated by Fitch.

The bonds are currently supported by a CLOC issued by Rabobank Nederland. On Sept. 23, 2014, Fitch will assign a rating to the bonds for the first time in connection with the provision of a substitute CLOC to be provided by Agribank, FCB.

The LOC bank is obligated to make regularly scheduled payments of principal of and interest on the bonds in addition to payments due upon maturity, acceleration and redemption, as well as purchase price for tendered bonds. The CLOC bank is obligated to make a payment for all outstanding bonds in the event the LOC bank fails to honor any draw or repudiates its obligations under the LOC. The ratings will expire upon the earliest of: (a) Sept. 28, 2015, the initial stated expiration date of the CLOC, unless such date is automatically extended for one-year periods; (b) conversion to the fixed interest rate mode; (c) any prior termination of the CLOC; and (d) defeasance of the bonds. The LOC provides full and sufficient coverage of principal plus an amount equal to 109 days of interest at a maximum rate of 10% based on a year of 365 days and purchase price for tendered bonds, while in the weekly rate mode. The CLOC provides the same full and sufficient coverage as the LOC. The Remarketing Agent for the bonds is W.R. Taylor & Company, LLC. The bonds are expected to be reoffered on Sept. 23, 2014.

The bonds will continue to bear interest at a weekly rate, but may be converted to a fixed rate. While bonds bear interest in the weekly rate mode, interest payments are on the first Thursday of each Dec., March, June, and Sept. The next scheduled interest payment date is Dec. 4, 2014. The trustee is obligated to make timely draws on the LOC to pay principal, interest, and purchase price. In the event the LOC bank fails to honor a draw or repudiates its obligations under the LOC, the trustee will declare an event of default and direct an immediate acceleration of all the bonds and draw on the CLOC for the amount of all outstanding bonds. Funds drawn under the LOC are held uninvested or may be invested in accordance with rating guidelines and are free from any lien prior to that of the bondholders.

Holders may tender their bonds on any business day, provided the trustee and remarketing agent are given the requisite prior notice of the purchase. The bonds are subject to mandatory tender: (1) upon conversion of the interest rate to a fixed rate mode; (2) upon expiration, substitution or termination of the LOC or CLOC; (3) following receipt of written notice from the bank of an event of default under the reimbursement agreement; and (4) following receipt of notice from the bank that the interest component will not be reinstated directing such mandatory tender. The bank has the option of directing an acceleration rather than a mandatory tender upon an event of default under the reimbursement agreement. Optional and mandatory redemption provisions also apply to the bonds. Additional bonds may be issued provided they receive a separate series designation and trustee is prohibited from drawing on the LOC to make payment on them.

Bond proceeds were used to finance the cost of the acquisition, construction, and installation and equipping of certain solid waste disposal components of the borrower's dairy production facility.

RATING SENSITIVITIES

The rating is exclusively tied to the short and long-term rating that Fitch maintains on the bank providing the CLOC and will reflect all changes to that rating.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:

--'U.S. Municipal Structured Finance Criteria', February 24, 2014;

--'Rating Guidelines for Letter of Credit-Supported Bonds and Commercial Paper', June 2, 2014.

Applicable Criteria and Related Research:

U.S. Municipal Structured Finance Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=736618

Rating Guidelines for Letter of Credit-Supported Bonds and Commercial Paper

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749431

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