Fitch Affirms Grain Spectrum Funding II, LLC, Series 2014-1 Notes

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings affirms the rating on Grain Spectrum Funding II, LLC, series 2014-1 notes (the series 2014-1 notes) as follows:

--$194,325,000 series 2014-1 wireless spectrum-backed notes at 'A-sf'; Outlook Stable.

TRANSACTION SUMMARY

Proceeds from the series 2014-1 note issuance were 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.

At closing, Grain III 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 Rating (IDR) of Cellco Partnership d/b/a Verizon Wireless, which is rated 'A-' with a Stable Outlook by Fitch.

KEY RATING DRIVERS

The rating is 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 received enforceability opinions at closing, 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. Verizon Wireless is rated 'A-', Outlook Stable by Fitch and 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 'AA-', Outlook Stable).

The Outlook for the notes is based on 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 would likely result in a change in the ratings of the series 2014-1 notes. For example, if Verizon Wireless were downgraded to 'BBB+', 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 at closing 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.

DUE DILIGENCE USAGE

No third-party due diligence was provided or reviewed in relation to this rating action.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

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

Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes (pub. 09 Mar 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863276

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Related Research

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

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

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=991372

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=991372

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150925005681/en/

Fitch Ratings
Primary Analyst
Shashi Srikantan
Director
+1-212-908-0393
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Kevin Corrigan
Senior Director
+1-212-908-0156
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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