News Column

Fitch to Rate Grain Spectrum Funding II, LLC, Series 2014-1 Notes; Presale Issued

September 2, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings expects to rate Grain Spectrum Funding II, LLC, series 2014-1 as follows:

--$196,545,000 series 2014-1 wireless spectrum-backed notes 'A-sf(EXP)'; 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 returned to the issuer as a dividend.

Grain III has entered into a 10-year extendable lease transfer agreement with Cellco Partnership (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 Spectrum Funding III, LLC (Grain III), Verizon Wireless as the lessee is obligated to make and guarantee lease payments under the lease and to pay expenses and obligations of the issuer.

The transaction rating relies on the Issuer Default Ratings (IDR) of Cellco Partnership d/b/a Verizon Wireless (Verizon) 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, which is a hell-or-high-water agreement, relies on the performance of Verizon 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's IDRs as an indicator of its performance under the agreements.

The transaction rating primarily relies on the IDR of Verizon. As a result, there is one risk presenting entity in this transaction for purposes of applying the Fitch CLN Matrix. Cellco d/b/a Verizon Wireless ([Verizon] '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 and any resulting permutation of this rating would likely result in a change in the ratings of the series 2014-1 note, according to the Fitch Risk CLN Matrix. For example, if Verizon 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 pre-sale 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 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

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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=863094

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analyst:

Jeffrey Prackup, +1-212-908-0839

Director

Fitch Ratings, Inc.

33 Whitehall Street

New York, NY 10004

or

Secondary Analyst:

Helen Anagnostos, +1-212-908-0876

Director

or

Committee Chairperson:

Kevin Corrigan, +1-212-908-9156

Senior Director

or

Alyssa Castelli, +1-212-908-0540

Media Relations, New York

alyssa.castelli@fitchratings.com


Source: Fitch Ratings


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