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Summary: Mesirow Financial Inc. (Series 2018-XM0699); Joint Criteria; Residual Certificates; Tender Option Certificates/Bonds


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Summary: Mesirow Financial Inc. (Series 2018-XM0699); Joint Criteria; Residual Certificates; Tender Option Certificates/Bonds


Closing date:

March 23, 2023



Underlying security:

Salt Lake City International Airport's (Salt Lake City) series 2018 airport revenue bonds (alternative-minimum tax) (term bonds)

Liquidity provider:

UBS AG, acting through its Stamford, Conn. branch

Administrative agent:

Mesirow Financial Inc.

Remarketing agent:

UBS Financial Services Inc.

Credit-enhancement provider:

UBS AG, acting through its Stamford, Conn. branch

Rate mode:



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

Trust assets include all distributions of principal; interest; and premiums, if any, from the custody certificates and liquidity facility, which is in place to support tender payments on floaters.

The long-term rating on the custody certificates jointly reflects, assuming low correlation, the ratings on the underlying securities and credit-enhancement provider. The long-term component of our rating on the floaters reflects the ratings on the custody certificates and addresses full and timely interest-and-principal payments when certificateholders have not exercised the put option. The short-term component reflects the lower of our rating on the liquidity provider or the short-term equivalent of our rating on the custody certificates. The short-term rating addresses full and timely interest-and-principal payments when floater certificateholders exercise the put option. The long-term rating on the residuals reflects the rating on the custody certificates.

Our ratings do not reflect our opinion of the likelihood certificateholders 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 certificates, except in certain circumstances as described in the structural review section.

Environmental, social, and governance

Our ratings on these issues are linked to the liquidity provider and underlying security. Environmental, social, and governance (ESG) factors that have an effect on the ratings on these linked entities could also have an effect on the ratings on these certificates. Our assessment of the creditworthiness of the underlying security and liquidity provider incorporates any material ESG credit factors. Our assessment of the creditworthiness of the liquidity provider and underlying security incorporates any material ESG credit factors regardless of any self-designation, such as green or social, the underlying issuer might apply. (For further information on the ESG considerations relevant for bank ratings and underlying securities, refer to the U.S. and Canadian, EMEA, Asia-Pacific, and Latin American bank ESG industry report cards and "Through The ESG Lens 3.0: The Intersection Of ESG Credit Factors And U.S. Public Finance Credit Factors," published March 2, 2022, on RatingsDirect.)

Structural Review

On the closing date, the custodian acquired the underlying securities and concurrently entered into a credit-enhancement agreement in the form of a direct-pay letter of credit that supports principal-and-interest payments on the underlying securities. The custodian has issued custody certificates equal to the par amount of underlying securities. Custody certificates evidence an ownership interest in the underlying securities and credit-enhancement agreement.

Concurrently, the trust acquired custody certificates and entered into a liquidity agreement that supports tender payments on floaters.

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

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.

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

Early call/redemption risk

Floater certificates 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 a liquidity agreement;
  • A mode-rate conversion; or
  • The trust being noncompliant with current financial market regulations.

Certificates are also subject to either whole or partial redemption due to the redemption of the underlying securities.

Liquidity termination risk

Upon the occurrence of a tender-option-termination event, the liquidity agreement will terminate without notice to floater holders. 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 certificates by both the underlying obligor and the principal credit source;
  • The ratings on the underlying securities or floater certificates (if there is no rating 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 the underlying securities.

Rating Sensitivity

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

Related Research

Through The ESG Lens 3.0: The Intersection Of ESG Credit Factors And U.S. Public Finance Credit Factors, March 2, 2022

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:Courtney Reopelle, Austin 303 721 4513;
Secondary Contact:Joshua C Saunders, Chicago + 1 (312) 233 7059;
Research Assistant:Kyle Lutz, Englewood

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