NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned the following ratings and Outlooks to InSite Wireless Group, LLC Secured Cellular Site Revenue Notes, Series 2013-1:
--$123,900,000 2013-1 class A 'BBBsf'; Outlook Stable;
--$39,600,000 2013-1 class B 'BB-sf'; Outlook Stable.
Fitch issued a presale report on the transaction on Aug. 21, 2013.
The following class is being issued but is not rated by Fitch:
--$14,000,000 2013-1 class C.
The ratings are based on information provided by the co-issuers as of Aug. 26, 2013.
The $177.5 million InSite Wireless Group, LLC notes are backed by mortgages representing approximately 72.7% of the annualized run rate (ARR) net cash flow (NCF) and guaranteed by the direct parent of the borrowers. The guarantees are secured by a pledge and first-priority-perfected security interest in 100% of the equity interest of the borrowers (which own or lease 512 cellular sites and own the rights to operate 16 distributed antennae system [DAS] networks) and the direct parent, respectively.
At closing, loan proceeds will be used to repay certain outstanding debt obligations and for general corporate purposes. The ratings reflect a structured finance analysis of the cash flows from the ownership interest in cellular sites, not an assessment of the corporate default risk of the ultimate parent, InSite Wireless Group, LLC.
KEY RATING DRIVERS
High Leverage: Fitch's NCF on the pool is $16.06 million, implying a
Fitch stressed debt service coverage ratio (DSCR) of 1.11x. The debt
multiple relative to Fitch's NCF is 9.47x, which equates to a debt yield
of 10.56%. Given the high amount of total leverage, Fitch applied a
rating cap of 'BBBsf' to the securitization.
Leases to Strong Tower Tenants: There are 1,236 wireless tenant leases. Telephony/broadband tenants represent 74.8% annualized run rate revenue (ARRR), and 49% of the ARRR is from investment-grade tenants. Tenant leases on the cellular sites have average annual escalators of approximately 3.1% and an average final remaining term (including renewals) of 21.1 years.
DAS Networks: The collateral pool contains 16 DAS networks representing 11% of the ARRR. DAS sites are located within buildings or other structures or venues for which an asset entity has rights under a lease or license to install and operate a DAS on the premises or to manage a DAS network on the premises. Fitch did not give credit for the four sites where InSite has a management contract to manage a DAS network owned by the DAS venue. These sites contribute 0.6% of ARRR. Additionally, Fitch limited proceeds from the DAS networks to the 'BBsf' category (i.e. applied a 'BBsf' rating cap), based on the uncertainty surrounding the licensing agreements in a venue-bankruptcy scenario and the limited history of these networks.
Prefunding: On the closing date, approximately 14% of total proceeds ($25.357 million) were deposited into a site acquisition account to be used by InSite to acquire additional cellular sites during the 12-month acquisition period. Prefunding introduces uncertainty as to final collateral characteristics. Fitch accounted for prefunding by stressing the NCF of the prefunding component to reflect the most conservative prefunding pool composition tests.
Fitch completed a break-even analysis comparing the interest-only debt service with both the Fitch stressed NCF and in-place aggregate ARR NCF, derived from data provided by the arranger, including estimated interest rates. Fitch compared the in-place aggregate ARR NCF and Fitch NCF with the interest-only debt service amount and determined that 73.8% and 71.8% reductions in NCF, respectively, would cause the 'BBBsf' notes to break even at 1.0x DSCR on an interest-only basis. Reductions to in-place aggregate ARR NCF and Fitch NCF of 44% and 40%, respectively, would cause the 'BB-sf' notes to break even at 1.0x DSCR on an interest-only basis.
Fitch evaluated the sensitivity of the 2013-1 class A ratings and a 14% decline in NCF would result in a one category downgrade to 'BBsf', while a 10% decline would result in a downgrade to below investment-grade and a 40% decline would result in a downgrade below 'CCCsf'. Rating sensitivity was also performed for the 2013-1 class B notes and a 10% decline in NCF would result in a one category downgrade to 'B-sf', while a 21% decline would result in a downgrade below 'CCCsf'. The Rating Sensitivity section in the presale report includes a detailed explanation of additional stresses and sensitivities.
The presale report is available to all investors on Fitch's web site www.fitchratings.com.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria'(May 24, 2013);
--'Criteria for Analyzing U.S. Wireless Tower Transactions' (Dec. 4, 2012);
--'Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions' (Sept. 21, 2012).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
Criteria for Analyzing U.S. Wireless Tower Transactions
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions