Fitch Affirms Fairway Outdoor Funding, LLC Secured Billboard Rev Notes Ser 2012-1 & 2015-1.
The Fairway Outdoor transaction represents a securitization in the form of notes backed by outdoor advertising sites with greater than 20,000 billboard faces as of October 2017. The class A-1 variable funding note termination date was extended to 2018. 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.
KEY RATING DRIVERS
Fitch Cash Flow and Leverage: Fitch's trailing-twelve- month (TTM) net cash flow (NCF) on the pool as of December 2017 is $41.7 million, implying a Fitch stressed debt service coverage ratio (DSCR) of 1.44x. The debt multiple relative to Fitch's NCF is 7.5x, which equates to a debt yield of 13.4%.
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 pro forma IO 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 notes 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.
Scheduled Amortization: Principal will be payable to the series 2015-1 class A-2 note to the extent funds are available totaling $4.9 million, or 14.3%, and 11.3% of the total series 2015-1, respectively, over the term prior to the ARD in Nov. 2019.
High Barriers to Entry: Fairway faces limited competition in most of its markets as result of the billboard permitting process and the significant federal, state, and local regulations that limit supply and prohibit new billboards.
There was a variance from Fitch's ' related to the stressed refinance constant and rating specific DSCR parameters. The constant used is outside Fitch's published refinance constant range for 'Other' property types; however, the constant used reflects Fairway's position in its respective markets, barriers to entry and experienced management. The DSCR attachment points used to determine the class sizes were derived from Fitch's large loan criteria, reflecting retail attachment points with an adjustment for non-mortgage collateral.
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 Rating Outlook for all classes remains Stable. Fitch does not foresee positive or negative ratings migration until a material economic or asset-level event changes the transaction's portfolio-level metrics. Upgrades may be limited due to the provision allowing the issuance of additional notes.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
Fitch has affirmed the following ratings:
--$50 million series 2012-1 Class A-1* at 'A-sf'; Outlook Stable;
--$149.28 million series 2012-1 class A-2 at 'A-sf'; Outlook Stable;
--$72 million series 2012-1 class B at 'BB-sf'; Outlook Stable;
--$31.39 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 maximum principal balance. All of the class balances reflect the December 2017 reporting period.
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|Publication:||Daily the Pak Banker (Lahore, Pakistan)|
|Date:||Mar 21, 2018|
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