articles Ratings /ratings/en/research/articles/201001-summary-fmsbonds-inc-series-2020-miz9039-residual-certificates-tender-option-certificates-bonds-11676792 content
Log in to other products

Login to Market Intelligence Platform


Looking for more?

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

Summary: FMSbonds Inc. (Series 2020-MIZ9039); Residual Certificates; Tender Option Certificates/Bonds


Danish Covered Bond Market Insights 2020


Servicer Evaluation: Trimont Real Estate Advisors LLC

Leveraged Finance & CLOs Uncovered Podcast: Diving into Root Bidco

Capital Markets View - October 2020

Summary: FMSbonds Inc. (Series 2020-MIZ9039); Residual Certificates; Tender Option Certificates/Bonds


Closing date:

Oct. 1, 2020



Underlying security:

U.S. Bank N.A. series FRA-1 custodial receipts

Underlying physical security:

Los Angeles County Housing Authority's series 2001D multifamily housing revenue refunding bonds (the Riverpark apartments project)

Tender-option provider:

Mizuho Capital Markets LLC


Mizuho Bank Ltd.

Administrative agent:

FMSbonds Inc.

Remarketing agent:

JPMorgan Securities LLC


S&P Global Ratings assigned the above-mentioned ratings to the floater and residual receipts (collectively the receipts), reflecting its opinion of the likelihood the trust will have sufficient assets to pay timely interest and full principal when due on the receipts.

Trust assets include all distributions of principal; interest; and premiums, if any, from the underlying securities and the tender-option facility and guaranty, which are in place to support tender payments on the floaters.

The long-term component of our rating on the floaters reflects the ratings on the underlying securities and addresses full and timely interest-and-principal payments when receiptholders have not exercised the put option. The short-term component reflects the lower of our rating on the guarantor supporting the tender-option provider and the short-term equivalent of our rating on the underlying security. The short-term rating addresses full and timely interest-and-principal payments when receiptholders exercise the put option. The long-term rating on the residuals reflects the rating on the underlying securities.

Our ratings do not reflect our opinion of the likelihood receiptholders will receive the full and timely payment of premiums or gain-share payments, and they do not reflect our opinion of the likelihood such payments will be subject to the entity funding such payments potentially filing for bankruptcy.

Based on our analysis, we believe the trust's assets support the full and timely payment of all obligations on the receipts, except in certain circumstances as described in the structural review section.

Structural Review

On the closing date, the trust acquired the underlying securities and concurrently entered into a tender-option agreement and related guaranty that supports tender payments on the floaters.

The trust has issued receipts in an amount equal to or less than the par amount of the underlying securities. The receipts will evidence a beneficial interest in trust assets, and they will be payable solely from payments received by the trust attributable to trust assets.

Interest payments from the underlying securities are passed through to floaterholders on either the 10th calendar day following the underlying physical security interest payment date--the payments of which are supported by Freddie Mac as the underlying credit-enhancement provider--or on the underlying physical security interest payment date if the full amount of interest due is paid by the underlying physical securities on such date.

The amount of interest paid to the floaterholders does not change for either payment date. Any amounts accrued between the underlying physical security interest payment date and the related floater interest payment date are not due and payable to floaterholders until the next succeeding floater interest payment date.

Put-option risks

The floaters are a variable-rate issuance with a holder option to demand repayment before floaters mature (known as the put or tender option), which is available during rated modes. The holders could exercise their put option with notice to the appropriate parties, such as the trustee or remarketing agent.

In the event a portion or all of the affected floaters cannot be remarketed successfully, the tender-option provider will loan funds equal to the entire purchase price of the affected floaters.

Residual receiptholders, by contrast, do not have a put option. However, part of the tender-option process requires an allocation of a portion of underlying securities to residual receiptholders (the reserved bonds). Upon a shortfall in sale proceeds, reserved bonds are distributed in kind to residual receiptholders.

Early call/redemption risk

Floater receipts are also subject to mandatory tender upon the occurrence of certain events detailed in trust documents. These events include:

  • The expiration, termination, and substitution of the tender-option provider;
  • A mode-rate conversion;
  • The trust being noncompliant with current financial market regulations; or
  • The whole or partial redemption of underlying securities.

In the case of any mandatory tender that requires trust termination, floater receipts are redeemed in full by the tender-option provider and cancelled with no further interest accrued following the related mandatory tender date. Payments to residualholders are made pro rata and pari passu with payments to the tender-option provider as a reimbursement for the amount of floater receipts redeemed. However, such payments to the tender-option provider and residualholders could be delayed past the scheduled mandatory tender date until the end of the 10-day notice period to Freddie Mac prior to any settlement of the underlying securities.

Tender-option termination risk

Upon the occurrence of a tender-option-termination event, the tender-option agreement will terminate without notice to floaterholders. These events, which we deem consistent with our published criteria, include:

  • An act of bankruptcy by the underlying obligor and the principal credit source;
  • The failure to pay principal and interest on the receipts by both the underlying obligor and principal credit source;
  • The ratings on the underlying securities are lowered below 'BBB-' by the rating agencies, except in the case of prerefunded securities; and
  • An event of taxability with respect to underlying securities.

In the event of any such tender-option-termination event, payments to receiptholders are distributed pro rata and pari passu between floater- and residualholders. However, such payments could be delayed past the scheduled tender-option-termination payment date until the end of the 10-day notice period to Freddie Mac prior to any settlement of underlying securities.

Rating Sensitivity

Changes to our rating on the receipts could result from, among other things, changes to transaction terms; our ratings on the underlying securities; or, in the case of floaters, changes to the tender-option provider or guarantor or our ratings on the tender-option provider or guarantor. The tender-option facility could expire prior to floater maturity. If the tender-option agreement has not been extended, or if an alternate tender-option agreement has not been delivered, we could withdraw the short-term component of the rating.

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at for further information. Complete ratings information is available to subscribers of RatingsDirect at All ratings affected by this rating action can be found on S&P Global Ratings' public website at Use the Ratings search box located in the left column.

Primary Credit Analyst:Nicholas Breeding, Centennial (303) 721-4362;
Secondary Contact:James Ho, New York + 1 (212) 438 1306;

No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, (free of charge), and and (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at

Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: