Fitch Assigns Ratings to Grain Spectrum Funding II, LLC, Series 2014-1 Notes

NEW YORK--()--Fitch Ratings assigns ratings to Grain Spectrum Funding II, LLC, series 2014-1 notes (the series 2014-1 notes) as follows:

--$196,545,000 series 2014-1 wireless spectrum-backed notes 'A-sf'; Outlook Stable.

TRANSACTION SUMMARY

Proceeds from the series 2014-1 note issuance are being used by Grain Spectrum Funding II, LLC (Grain II), the issuer, to finance the purchase of wireless spectrum licenses by the issuer's subsidiary Grain Spectrum III, LLC (Grain III) and to pay expenses, with the remaining proceeds returned to the ultimate equity owners of the issuer as a dividend.

Grain III has entered into a 10-year extendable lease transfer agreement with Cellco Partnership, d/b/a Verizon Wireless (Verizon Wireless). Payments made by Verizon Wireless, the lessee, under the lease transfer agreement support payments made on the series 2014-1 notes.

Based on its commitment under a 10-year extendable 'hell-or- high-water' lease transfer agreement with Grain III, Verizon Wireless, as the lessee, is obligated to make and guarantee lease payments.

The transaction rating relies on the Issuer Default Ratings (IDR) of Cellco Partnership d/b/a Verizon Wireless (Verizon Wireless) IDR rated 'A-' with a Stable Outlook by Fitch.

KEY RATING DRIVERS

The rating is assigned as a 'first to default' rating, in accordance with Fitch's 'Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes' and 'Counterparty Criteria for Structured Finance and Covered Bonds.' The strength of the lease agreement, a 'hell-or-high-water agreement', relies on the performance of Verizon Wireless as outlined in the transaction summary above. Fitch has received enforceability opinions on the agreements, and believes the lessee will perform under its agreement so long as the lessee has not defaulted on its other outstanding indebtedness. As a result of this exposure to default risk on the lessee's financial obligations, Fitch is comfortable using Verizon Wireless' IDR as an indicator of its performance under the agreements.

The transaction rating primarily relies on the IDR of Verizon Wireless. As a result, there is one risk presenting entity in this transaction for purposes of applying the Fitch CLN Matrix. Cellco Partnership, d/b/a Verizon Wireless ([Verizon Wireless] 'A-', Outlook Stable) is the IDR that is considered the link to the rating on the notes. The transaction relies to a lesser extent on U.S. Bank N.A. as trustee (rated 'A-', Outlook Stable by Fitch).

The Outlook for the notes is based upon the Stable Outlook on Verizon Wireless.

RATING SENSITIVITIES

The rating of the series 2014-1 notes is sensitive to the IDR of the lessee. Any change in the rating of Verizon Wireless and any resulting permutation of this rating would likely result in a change in the ratings of the series 2014-1 notes, according to the Fitch Risk CLN Matrix. For example, if Verizon Wireless were downgraded to 'BBB+', ceteris paribus, the ratings of the series 2014-1 notes would likely be downgraded to 'BBB+sf'.

Key rating drivers and rating sensitivities are further described in the presale report titled 'Grain Spectrum Funding II, LLC, Series 2014-1', dated Sept. 2, 2014, available on www.fitchratings.com, or by clicking on the link.

An assessment of the transaction's representations and warranties was also completed and found to be consistent with the ratings assigned to the series 2014-1 notes. For further information, see 'Grain Spectrum Funding II, LLC, Series 2014-1 Representation & Warranties Appendix', dated Sept. 2, 2014.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--Grain Spectrum Funding II, LLC, Series 2014-1;

--Grain Spectrum Funding II, LLC, Series 2014-1 -- Appendix.

Applicable Criteria and Related Research:

Grain Spectrum Funding II, LLC, Series 2014-1

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=767828

Grain Spectrum Funding II, LLC, Series 2014-1 -- Appendix

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=768508

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=886194

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Contacts

Fitch Ratings
Primary Analyst
Jeffrey Prackup
Director
+1-212-908-0839
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Helen Anagnostos
Director
+1-212-908-0876
or
Committee Chairperson
Kevin Corrigan
Senior Director
+1-212-908-9156
or
Media Relations
Sandro Scenga, New York, +1 212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Jeffrey Prackup
Director
+1-212-908-0839
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Helen Anagnostos
Director
+1-212-908-0876
or
Committee Chairperson
Kevin Corrigan
Senior Director
+1-212-908-9156
or
Media Relations
Sandro Scenga, New York, +1 212-908-0278
sandro.scenga@fitchratings.com