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03 Apr 2009
First Rating of a Structured Debtor-in-Possession Loan Facility
New York, April 03, 2009 -- Moody's has assigned a provisional (P)A2 rating to Tribune Receivables
LLC $225 million loan facility. The loan facility is structured
as a $150 million Term Loan and a $75 million Revolving
Loan. Both loans are pari passu in repayment. The facility
is expected to close on April 10, 2009, at which time Moody's
expects to assign a long-term A2 rating. The facility has
an expected termination date of April 10, 2010, and a final
maturity date 45 days thereafter.
The loans are backed by trade receivables generated by the Tribune Company—which
filed for Chapter 11 bankruptcy protection on December 8, 2008—from
its publishing and broadcast divisions. The receivables are predominately
for advertising services provided by the two divisions. These receivables
are sold to Tribune Receivables LLC, a bankruptcy-remote
Delaware limited liability company that is not part of the Tribune Company
bankruptcy estate. Tribune Receivables LLC is funded by the loans
under a typical trade receivables securitization, with standard
eligibility requirements, performance-based wind-down
triggers and dynamic, performance-based reserve requirements.
The Tribune Receivables LLC facility was originally established in July
2008 as a trade receivables securitization funded in an ABCP conduit.
After the Tribune Company bankruptcy filing in December 2008, it
was restructured as a temporary lending facility approved by a bankruptcy
court order. Loans under the Tribune Receivables LLC facility currently
have the status of a "debtor-in-possession"
("DIP") financing under a court order. Repayment of
the loans has super-priority status in repayment to all other Tribune
Company unsecured creditors in the bankruptcy estate. There is
also a guarantee of repayment by Tribune Company and its debtor subsidiaries.
Moody's (P)A2 rating on the Tribune Receivables LLC loan facility
is based primarily on the following:
--The quality of the receivables originated by the Tribune
--Credit enhancement in the form of overcollateralization
based on a dynamic formula that responds to changes in losses, dilution
and interest rates;
--The capabilities of Tribune Company as originator and
servicer, supported by Hewlett-Packard Company (A2/Prime-1)
as backup servicer;
--The bankruptcy remote structure of Tribune Receivables
--The status of the facility as a debtor-in-possession
lending facility as confirmed in the bankruptcy court order, giving
repayment a super-priority claim relative to other Tribune Company
unsecured creditors in the bankruptcy estate;
--A guaranty from Tribune Company covering the loans and
other secured obligations of Tribune Receivables LLC.
Barclays Capital served as sole structuring advisor and sole lead arranger
on the facilities and Barclays Bank PLC (Aa3/P-1/C) will serve
as Administrative Agent.
Structured Debtor-in-possession Loan Facility
Tribune Receivables LLC is the first structured DIP facility rated by
Moody's. After Tribune Company filed for Chapter 11 bankruptcy
protection on December 8, 2008, the Tribune Receivables LLC
facility was amended to provide DIP financing to Tribune Company.
The amendments to the structure, the bankruptcy remote status of
Tribune Receivables LLC and the true sale of the receivables by Tribune
Company to Tribune Receivables LLC were all confirmed in the final court
order as a 120-day facility. In this facility the court
order has confirmed the bankruptcy-remote status of the transaction,
while in most structured transactions bankruptcy remoteness and true sale
would be subject to a legal opinion and could later be challenged in court.
Moody's expects that a court order at closing will confirm these findings
for the rated facility.
Tribune Receivables LLC is bankruptcy remote, and sales of receivables
originated by Tribune Company entities are transferred in a true sale.
Tribune Receivables LLC is outside of the bankruptcy estate. The
receivables sold to Tribune Receivables LLC are outside of the bankruptcy
estate once sold as confirmed by the court order. Therefore Moody's
applied its standard methodology for rating trade receivables transactions
instead of its methodology for rating DIP facilities.
In assigning the (P)A2 rating Moody's reviewed the historical performance
of the receivables and considered their likely repayment relative to the
available enhancement under various scenarios. The advance rate
is determined by a formula that considers the level and changes in the
loss, dilution and interest rate. Moody's also considered
the origination and servicing of the receivables and the capabilities
of the parties responsible for those activities. In this review
Moody's considered the likelihood and impact of a liquidation of
the Tribune Company, as well as its emergence from bankruptcy.
While the receivables have been affected by current economic conditions,
they continue to perform well. Currently delinquencies of 91 or
more days are in the range of 4-6%, and chargeoffs
are under 1%. Dilution, typically due to billing adjustments,
runs between 1-3% of sales. The required reserve
ratio for loss, dilution, interest and fees is approximately
30-35%, for an advance rate of approximately 65-70%
against net eligible receivables, and approximately 50-55%
against gross receivables.
One positive factor is that Tribune Receivables LLC has a backup servicing
arrangement with Hewlett-Packard Company. Under this agreement
Hewlett-Packard has access to Tribune Company software and systems
for processing their receivables, and maintains copies of the data
which is updated on a regular basis. Hewlett-Packard is
currently servicing a significant share of the Tribune Company's
publishing receivables under an agreement with Tribune Company.
This means that Hewlett-Packard has direct experience with collecting
the assets should they be called upon to step in as servicer for the entire
pool. The availability of an experienced backup servicer should
ensure the smooth collection of the receivables even if the Tribune Company
fails to emerge from bankruptcy.
As a service to the market and typically at the request of an issuer,
Moody's will assign a provisional rating when it is highly likely that
the rating will become final after all documents are received, or
an obligation is issued into the market. A provisional rating is
denoted by placing a (P) in front of the rating.
The principal methodology used in rating the transaction is described
in "Moody's Approach to Rating Trade Receivables Backed Transactions"
which can be found at www.moodys.com in the Credit Policy
& Methodologies directory, in the Ratings Methodologies subdirectory.
Other methodologies and factors that may have been considered in the process
of rating this issue can also be found in the Credit Policy & Methodologies
Issuer: Tribune Receivables LLC
$150 Million Term Loan Facility rated (P)A2
$75 Million Revolving Loan Facility rated (P)A2
Senior Vice President
Structured Finance Group
Moody's Investors Service
Moody's Assigns Provisional (P)A2 Rating to Tribune Receivables LLC $225 Million Loan Facility
Structured Finance Group
Moody's Investors Service
No Related Data.
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