Fitch Places Grain Spectrum Funding, LLC Series 2013-1 on Rating Watch Negative

NEW YORK--()--Fitch Ratings places the following class of notes issued by Grain Spectrum Funding, LLC on Rating Watch Negative:

--$330,050,000 series 2013-1 wireless spectrum-backed notes 'BBB+sf'.

KEY RATING DRIVERS

The rating is based on the Issuer Default Ratings (IDRs) of AT&T and Verizon, which are the two risk presenting entities in this transaction for purposes of applying the Fitch Two-Risk CLN Matrix, further described in the criteria 'Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes'. Verizon (IDR of 'A-', Outlook Stable) is considered the weakest link and AT&T (IDR of 'A', Rating Watch Negative) is considered an additional risk. The transaction relies to a lesser extent on Citibank as trustee (Citibank, N.A.; rated 'A/F1', Outlook Stable by Fitch). The Rating Watch for the notes is based upon the Rating Watch Negative on AT&T.

RATING SENSITIVITIES

Changes in the IDR of either AT&T or Verizon may result in a change in the rating of the series 2013-1 note, according to the Fitch Two-Risk CLN Matrix.

Proceeds from Grain's series 2013-1 note issuance were used by the issuer to finance the purchase of wireless spectrum licenses from two of the issuer's subsidiaries and to pay expenses, with the remaining returned to the issuer as a dividend. Through lease transfer and license purchase agreements (the agreements) the issuer is leasing the AWS spectrum to Verizon and the 700 MHz spectrum to AT&T. Quarterly payments received under the agreements provide the issuer with $22.96 million per annum with a 2% annual escalator, and a five year term with automatic renewal to extend the lease to 20 years.

Initial Key Rating Drivers and Rating Sensitivity are further described in the New Issue Report published on Dec. 12, 2013. A comparison of the transaction's Representations, Warranties, and Enforcement Mechanisms (RW&Es) is also available by accessing the reports and links indicated below.

Fitch has placed the following rating on Rating Watch Negative:

--$330,050,000 series 2013-1 wireless spectrum-backed notes 'BBB+sf'.

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

Applicable Criteria & Related Research:

--'Global Structured Finance Rating Criteria' (Aug. 4, 2014);

--'Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes' (Feb. 19, 2014);

--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 14, 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=729785

Counterparty Criteria for Structured Finance and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=873834

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Contacts

Fitch Ratings
Primary Surveillance Analyst
Shashi Srikantan
Director
+1-212-908-0393
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Alina Pak
Senior Director
+1-312-368-3184
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Surveillance Analyst
Shashi Srikantan
Director
+1-212-908-0393
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Alina Pak
Senior Director
+1-312-368-3184
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com