CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed all classes of Fairway Outdoor Funding, LLC secured billboard revenue notes series 2012-1 and 2015-1. A full list of rating actions follows at the end of this release.
The pari passu series 2012-1 and 2015-1 notes are secured by a security interest in all membership interests and limited partnership interests in the issuer and a guaranty of all of the issuer's obligations by the issuer's subsidiaries. Additionally, the notes are secured by a first perfected security interest in all of the issuer's right, title, and interest in and to the billboard assets as well as all income, payments and proceeds of any of the foregoing and all accessions to, substitutions and replacements for, and rents, profits, products, insurance proceeds, confiscation and/or condemnation awards, and any other proceeds from the disposition of any of the foregoing.
Billboard assets include all outdoor display assets owned by the issuer to advertise products and services, which assets include, but are not limited to all billboards, digital billboards, permits, licenses, contracts, ground leases, real property, insurance proceeds, and structures as well as any amounts generated from the liquidated assets. As this transaction isolates the assets from the parent company, the ratings reflect a structured finance analysis of the cash flows from advertising structures, not an assessment of the corporate default risk of the ultimate parent. In total, Fairway operates nearly 20,000 billboard faces in 11 divisions in 15 states.
The issuer anticipates the proceeds from the variable funding note to be used for acquisitions in markets where they already have a presence. In January 2015, the direct and indirect interests in the issuer parent, Fairway Media Group, were acquired by funds managed by GTCR, LLC, certain affiliates of Adams Outdoor Advertising, and other co-investors.
KEY RATING DRIVERS
Cash Flow and Leverage: Fitch's net cash flow (NCF) on the pool is $36.8 million, implying a Fitch stressed debt service coverage ratio (DSCR) of 1.33x. The debt multiple relative to Fitch's NCF is 7.9x, which equates to a debt yield of 12.6%.
Notes Not Secured by Mortgages: The security interest will be perfected by a pledge of the membership interests of the issuer and its subsidiaries and the filing of financing statements under the Uniform Commercial Code (UCC). The issuer will be filing UCCs on the permits and the advertising contracts. The security interest in the equity of the issuer provides the noteholders with the ability to foreclose on the issuer in an event of default. The lack of mortgages is mitigated in this transaction as the value of billboard assets is heavily dependent on non-mortgageable permits and licenses, which have been secured by UCC filings.
Additional Notes: Fairway will have the ability to issue additional notes in the future subject to underwriting factors that include, but are not limited to the following: the issuer pro forma interest-only DSCR after such issuance is no less than 2.00x, the issuer pro forma leverage multiple is no greater than 5.1x and 7.1x for class A and class B notes, respectively, and ratings confirmation. As Fitch monitors the transaction, the possibility of upgrades may be limited due to the provision that allows additional notes.
Additional information on the series 2012-1 notes is available in Fitch's Oct. 17, 2012 report, 'Fairway Outdoor Funding, LLC Secured Billboard Revenue Notes, Series 2012-1', which is available at 'www.fitchratings.com'.
The Stable Outlooks on the series 2012-1 and series 2015-1 notes reflect the stable performance of the portfolio and the limited prospect for upgrades given the provision to issue additional notes.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following ratings:
--$17 million series 2012-1 Class A-1* at 'A-sf'; Outlook Stable;
--$160.24 million series 2012-1 class A-2 at 'A-sf'; Outlook Stable;
--$72 million series 2012-1 class B at 'BB-sf'; Outlook Stable;
--$33.63 million series 2015-1 class A-2 at 'A-sf'; Outlook Stable;
--$8.85 million series 2015-1 class B at 'BB-sf'; Outlook Stable.
*Variable funding note.
Additional information is available at www.fitchratings.com.
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 27 Aug 2015)
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
Fairway Outdoor Funding, LLC Secured Billboard Revenue Notes, Series 2012-1 -- Appendix
Dodd-Frank Rating Information Disclosure Form