Rayburn Country Securitization LLC, Senior Secured Cost Recovery Bonds, Series 2022 -- Moody's assigns (P)Aaa (sf) to Rayburn's cost recovery bonds

Rating Action: Moody's assigns (P)Aaa (sf) to Rayburn's cost recovery bondsGlobal Credit Research - 18 Jan 2022New York, January 18, 2022 -- Moody's Investors Service (Moody's) has assigned provisional ratings of (P)Aaa (sf) to three tranches of senior secured cost recovery bonds (the bonds) to be issued by Rayburn Country Securitization LLC (the issuer). The sponsor, Rayburn Country Electric Cooperative, Inc. (Rayburn, unrated), is a member-owned electric generation and transmission cooperative owned by four electric distribution cooperative members, with their service territories located across 16 counties in northeastern Texas, including some of the suburbs of Dallas, Texas. Rayburn's cooperative members include Fannin County Electric Cooperative, Inc., Farmers Electric Cooperative, Inc., Grayson-Collin Electric Cooperative, Inc., and Trinity Valley Electric Cooperative, Inc. The four cooperative members provide electric service to approximately 229,000 metered electric customers in their respective service territories for residential, commercial, and industrial uses. Rayburn will also act as the master servicer of the securitization and each of the cooperative members / owners of Rayburn will act as the sellers and servicers of the securitized property backing the bonds. This bond issuance will be Rayburn's first securitization debt financing and is the first utility cost recovery charge (UCRC) securitization transaction that covers costs associated with disruption in electricity supply and the first associated with extraordinary costs incurred as a result of winter storm Uri, in February 2021.The members and Rayburn will use the proceeds from the issuance of the bonds to recover extraordinary costs they incurred to purchase power from Electric Reliability Council of Texas, Inc. (ERCOT, A1 Negative) at extraordinarily high prices due to the supply and demand imbalance caused by winter storm Uri in February 2021.Winter storm Uri brought unusually frigid temperatures to the south-central US in mid-February 2021 and disrupted natural gas supplies and power plant operations just as electricity and gas demand surged, resulting in widespread blackouts across Texas and a significant, though temporary, spike in energy prices. This forced Rayburn to buy electricity from the ERCOT market for its members and their customers at wholesale prices that spiked to $9,000 per megawatt-hour for a longer than expected period of time. To reduce the cost of financing these extraordinary costs and expenses, the Texas legislature adopted SB 1580 which enable electric cooperatives to use securitizations to finance those costs and expenses. The outstanding amounts still owed to ERCOT will be repaid with the proceeds of this securitization.The asset that will back the bonds is securitized property established by the irrevocable Financing Order. The Financing Order was approved by the board of directors of each of the four cooperative members and Rayburn and grants the members the right to impose, bill, collect, and receive non-bypassable securitized charges (SCs) from all retail electric customers within the four-members' service territories across 16 counties in northeastern Texas. The Financing Order also establishes the right to periodically adjust the SCs through a statutory, mandatory, uncapped true-up adjustment mechanism to ensure timely bond payments until the bonds are repaid in full. The true-up adjustment mechanism is the primary form of credit enhancement supporting the bonds.The complete rating actions are as follows:Issuer: Rayburn Country Securitization LLC, Senior Secured Cost Recovery Bonds, Series 2022Rayburn Country Securitization LLC, Senior Secured Cost Recovery Bonds, Series 2022, Tranche A-1, Assigned (P)Aaa (sf)Rayburn Country Securitization LLC, Senior Secured Cost Recovery Bonds, Series 2022, Tranche A-2, Assigned (P)Aaa (sf)Rayburn Country Securitization LLC, Senior Secured Cost Recovery Bonds, Series 2022, Tranche A-3, Assigned (P)Aaa (sf)RATINGS RATIONALEThe provisional ratings assigned to the cost recovery bonds are based primarily on the following:1) the strength of the securitization provisions in Texas Senate Bill 1580 (the Financing Act), including the state's non-impairment pledge, and the irrevocable Financing Order, which together authorize the creation of the securitized property backing the cost recovery bonds and strongly protect the securitized property2) credit enhancement consisting of a statutory uncapped true-up adjustment mechanism that mandatorily adjusts the SCs at least semi-annually to ensure the SC collections are sufficient to timely pay principal and interest on the bonds until they are paid in full, and a non-declining capital subaccount fully funded at closing at 0.50% of the initial principal balance of the bonds,3) the remote likelihood of a successful legal, political, or regulatory challenge to the securitized property and other rights that the members will sell to the issuer on the transaction's closing date for the benefit of the indenture trustee on behalf of bondholders,4) the economic stability of the predominantly residential ratepayer base in the members' service territory from whom the SCs will be collected,5) the strength and experience of the members as servicers and Rayburn as master servicer of the securitized property,6) the low probability that collections arising from the securitized property could fall short of the scheduled principal and interest payments on the bonds, and7) the initial SC will represent about 9.3% of a 1000 kWh residential customer's electricity bill, based on the December 2020 data.The ratepayer base within the members' service territory from whom the SCs will be collected is economically stable, which is a credit strength. The members provide electric service to approximately 229,000 customers, and about 90% of the ratepayer base is made up of residential customers.This transaction will benefit from the inclusion of a non-impairment pledge from the State of Texas included in the Financing Act, which strongly protects the securitized property backing the bonds. Under the state pledge, the State of Texas agrees and pledges to bondholders that it will not take or permit any action that would limit or alter the securitized property, the SCs, the Financing Order or the rights under the Financing Order until the bonds are repaid in full and discharged, except as dictated by the true-up adjustment mechanism. In addition, the Financing Act and Financing Order contain the typical strong true-sale and security interest provisions.The Financing Order, coupled with the Financing Act, provides that the SCs are non-bypassable. Non-bypassable means that the issuer is entitled to collect the SCs from all existing and future retail electric consumers receiving distribution services within the service territory, and the consumers are legally required to pay the SCs, including consumers of any successor. The issuer is authorized to collect the SCs even if consumers elect to purchase electricity from an alternative electric service provider or self-generate but remain connected to the electric grid.The Financing Act and Financing Order authorize a mandatory, uncapped true-up adjustment mechanism, which is the key form of credit enhancement supporting the bonds. The true-up adjustment mechanism mandatorily adjusts the SCs at least semi-annually to ensure sufficient collections to make timely payments of interest and scheduled principal on the bonds as well as associated ongoing financing costs until the bonds are repaid in full. Additionally, the Financing Order authorizes interim true-up adjustments at any time, if the servicer deems necessary, to ensure sufficient collections to make timely payments on the bonds and associated ongoing financing costs as well as replenish any draws on the capital subaccount.PRINCIPAL METHODOLOGYThe principal methodology used in these ratings was "Utility Cost Recovery Charge Securitizations Methodology" published in February 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1259685. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Factors that would lead to an upgrade or downgrade of the ratings:Factors or circumstances that could drive the rating down are a significant decline in the ratepayer base or consumption in Rayburn's members' service territories, unanticipated consumer delinquencies and defaults, self-generation, extreme weather fluctuations, or natural disasters or pandemics affecting the servicer's ability to accurately forecast electricity usage.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.Moody's did not use any models, or loss or cash flow analysis, in its analysis.Moody's did not use any stress scenario simulations in its analysis.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. 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Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Aron Bergman Vice President - Senior Analyst Structured Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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