CHICAGO--(BUSINESS WIRE)--Fitch Ratings has assigned the following ratings and Rating Outlooks to Adams Outdoor Advertising Limited Partnership (LP), Secured Billboard Revenue Notes, Series 2014-1:
--$316,159,000 class A-1 'Asf'; Outlook Stable;
--$23,000,000 class A-X 'Asf'; Outlook Stable;
--$57,483,000 class B 'BBBsf'; Outlook Stable;
--$47,903,000 class C 'BBsf'; Outlook Stable.
The transaction represents a securitization in the form of notes backed by approximately 9,908 outdoor advertising displays.
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, Adams Outdoor Advertising (AOA).
KEY RATING DRIVERS
Cash Flow and Leverage: Fitch's net cash flow (NCF) on the pool is $57.4 million, implying a Fitch stressed debt service coverage ratio (DSCR) of 1.51x on the closing date amount. The debt multiple relative to Fitch's NCF is 7.7x, which equates to a debt yield of 12.9% on the closing date amount.
Dominant Market Share: Adams Outdoor Advertising L.P. (AOA) primarily operates in midsize markets where it is the dominant provider of outdoor advertising with an average 83.5% market share. This dominant market share adds to the predictability of cash flow by minimizing pricing pressure from competition.
High Barriers to Entry: AOA faces limited competition in its market as a result of the billboard permitting process and the significant federal, state, and local regulations that limit supply and prohibit new billboards.
Diverse Number of Assets: AOA currently operates 9,908 billboard faces including 3,063 bulletins, 6,087 posters, 164 digital displays and 594 other displays in 14 primary markets in seven states. In addition, no customer accounts for greater than 4.5% of revenues, and no industry accounts for greater than 13.8% of revenues.
RATING SENSITIVITIES
Fitch performed several stress scenarios in which Fitch's NCF was stressed. Fitch determined that a 62.6% reduction in NCF would cause the notes to break even at 1.0x DSCR on an interest-only basis.
Fitch evaluated the sensitivity of the ratings for classes A-1 and A-X, and a 14.3% decline in NCF would result in a one-category downgrade, while a 23.1% decline would result in a downgrade to below investment-grade. The Rating Sensitivity section in the new issue report includes a detailed explanation of additional stresses and sensitivities.
A detailed description of Fitch's rating analysis including key rating drivers, stresses, rating sensitivity, analysis, model, criteria application and data adequacy is available in Fitch's New Issue Report. The new issue report is available to all investors on Fitch's web site 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--Global Structured Finance Rating Criteria (August 2014)
--Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (September 2014)
--U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria (December 2014)
--Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (May 2014)
--Rating Criteria for U.S. Commercial Mortgage Servicers (February 2014)
--Counterparty Criteria for Structured Finance and Covered Bonds (May 2014)
Applicable Criteria and Related Research: Adams Outdoor Advertising Limited Partnership
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=843108
Rating Criteria for U.S. Commercial Mortgage Servicers
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=735382
Criteria for Rating Caps and Limitations in Global Structured Finance Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748781
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=772328
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=960155
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