NEW YORK--(BUSINESS WIRE)--#KBRA--KBRA assigns preliminary ratings to bonds issued by Texas Natural Gas Securitization Finance Corporation, a customer rate relief (CRR) ABS transaction.

The purpose of the transaction is to recover the stranded costs for several utility companies resulting from a large imbalance between the supply and demand of natural gas between utility companies and consumers in February 2021. The imbalance followed an extended period of cold and winter precipitation that caused a significant reduction in natural gas availability during Winter Storm Uri and the increased need for natural gas for customers to heat their homes and buildings. It is anticipated the Issuer will issue one class of bonds in three tranches (Tranches or Bonds). The proceeds will be used to pay local natural gas distribution companies’ (hereafter, LDCs) extraordinary costs incurred to secure gas supplies and to provide natural gas service during Winter Storm Uri, as well as the financing costs relating to the subject transaction. The participating gas utility companies (PGUs) in the transaction act as natural gas LDCs for their customers. The Bonds are collateralized by the customer rate relief property (CRR Property), which consists of the right to impose, bill, collect, and receive the customer rate relief charge (CRR Charge) from the existing and future customers of the PGUs, as well as the scheduled and interim adjustments to the CRR Charge (True-Up Adjustments).

The Bonds will be issued pursuant to a financing order adopted and approved by the Railroad Commission of Texas (the Commission) on February 8, 2022 (the Financing Order) in accordance with House Bill No. 1520, 87^th Regular Session of the Texas Legislature (the Securitization Law). The Financing Order and Securitization Law provide customers of participating LDCs with rate relief by extending the period over which they can pay for the high gas costs associated with Winter Storm Uri.

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Related Publications

• General Global Rating Methodology for Asset‑Backed Securities
• Global Structured Finance Counterparty Methodology
• ESG Global Rating Methodology

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

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