Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
LOG IN
Don't want to see this again?
REGISTER
OR
Accept our Terms of Use to continue to Moodys.com:

PLEASE READ AND SCROLL DOWN!

By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

Terms of One-Time Website Use

1.            Unless you have entered into an express written contract with Moody’s to the contrary, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.               

2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

3.            To the extent permitted by law, Moody’s and its directors, officers, employees, representatives, licensors and suppliers disclaim liability for: (i) any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with use of the Information; and (ii) any direct or compensatory damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud or any other type of liability that by law cannot be excluded) on the part of Moody’s or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with use of the Information.

4.            You agree to read [and be bound by] the more detailed disclosures regarding Moody’s ratings and the limitations of Moody’s liability included in the Information.     

5.            You agree that any disputes relating to this agreement or your use of the Information, whether sounding in contract, tort, statute or otherwise, shall be governed by the laws of the State of New York and shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan.​​​

I AGREE
Rating Action:

Moody's assigns Baa2 (sf) to Sprint Corp.'s second note issuance from existing spectrum license securitization program

21 Mar 2018

Approximately $3.9 billion of asset-backed securities rated

New York, March 21, 2018 -- Moody's Investors Service has assigned definitive ratings of Baa2 (sf) to the Series 2018-1 Senior Secured Class A-1 and Class A-2 notes (the 2018-1 Class A notes, or the notes) issued jointly and severally by Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC and Sprint Spectrum Co III LLC (the issuers). The issuers are bankruptcy-remote, indirect, wholly-owned subsidiaries of Sprint Corporation (Sprint; B2 stable), a holding company that, including its subsidiaries, is one of the largest mobile carriers in the US. Sprint formed the issuers to securitize a portfolio of wireless spectrum licenses.

The transaction is backed by a single lease with Sprint Communications, Inc. (SCI; B3 stable) for a portfolio of spectrum licenses. Performance under the lease is further enhanced by a senior guarantee from Sprint Corporation and certain of SCI's operating subsidiaries. The spectrum portfolio includes licenses of spectrum in the 2.5 GHz band and the 1.9 GHz band. Spectrum licenses are government-granted licenses for the use of specific frequency ranges of electromagnetic spectrum for telecommunications.

The three co-issuer structure is a unique feature intended to maintain the three separate "silos" of license holders that existed prior to the transfer of the licenses to the issuers. The Class A-1 and Class A-2 notes each have different principal payment schedules and anticipated repayment dates. The 2018-1 Class A notes are senior term notes issued under a master trust structure. The issuance amount for this series is approximately $3.9 billion, which brings the total program issuance amount to $7 billion, after accounting for the outstanding $3.1 billion of Series 2016-1, Class A-1 notes (together, the Class A notes). The amended indenture allows for the formation of additional co-issuers that could issue additional notes out of the same trust upon the acquisition of additional spectrum license collateral. The Series 2016-1 Class A-1 notes were issued in the amount of $3.5 billion in October 2016 from the same trust.

The issuers lease the collateral back to SCI through wholly owned subsidiary license holders under a long-term, "hell-or-high-water" lease, under which the lessee has extremely limited termination rights. SCI's payment obligations under this lease are guaranteed on a senior unsecured basis by Sprint and all of SCI's subsidiaries that guarantee (the subsidiary guarantors) its revolving credit facility and term loan that was entered into on Febuary 2, 2017 (the credit agreement) that we currently rate Ba2. The subsidiary guarantors account for at least 80% of SCI's total consolidated assets and revenues. The claim on the guarantee is secured on an equal and ratable basis by any assets of Sprint and SCI's operating subsidiaries that secure the credit agreement and SCI's credit agreement with Export Development Canada, or any replacement credit agreement up to $3.5 billion. Because the present value of the lease payments significantly exceeds the balance of the notes, even a relatively low 50% recovery on the guarantee claim would be sufficient to repay the Class A notes in full. The spectrum portfolio, spectrum lease and spectrum lease guarantee ultimately back the notes. The noteholders do not have a security interest in the directly-held licenses because of restrictions imposed by the communications laws, but the noteholders do have a security interest in the proceeds derived from the directly-held licenses and their sale, lease, assignment or transfer.

The complete rating actions are as follows:

Issuer: Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC, Sprint Spectrum Co III LLC

Series 2018-1 Senior Secured Notes, Class A-1, Assigned Baa2 (sf)

Series 2018-1 Senior Secured Notes, Class A-2, Assigned Baa2 (sf)

RATINGS RATIONALE

Moody's assigned the definitive ratings on the notes using an approach similar to rating credit-tenant lease obligations. Moody's calculated an expected loss by assuming a probability of default and loss given default based on the credit quality of the lessee, the nature of the collateral, the terms of the lease, and the structural features of the transaction. Certain features of this transaction permit the notes to achieve considerable uplift beyond the lessee's rating, including the low probability that the lessee would liquidate under a Chapter 7 bankruptcy, the importance of the spectrum portfolio to the lessee, the value of the spectrum lease guarantee and the availability of a liquidity reserve.

Moody's definitive ratings on the notes are dependent on Sprint's corporate family rating (CFR), currently B2. A one notch change in Sprint's CFR changes the model-implied rating of the Class A notes by about half a notch to one notch. If Moody's were to upgrade Sprint's CFR by one notch to B1, it would result in a Baa1 model-implied rating for the Class A notes. If Moody's were to downgrade Sprint's CFR by one notch to B3, it would result in a Baa2 model-implied rating for the Class A notes. If Moody's were to downgrade Sprint's CFR by two notches to Caa1, it would result in a Baa3 model-implied rating for the Class A notes.

SCI is a large company with significant franchise value, a substantial customer base and an extensive nationwide network infrastructure. These factors contribute to our view that, in the event of insolvency, SCI is more likely to reorganize under a Chapter 11 bankruptcy filing, as it would likely realize more value as an ongoing business concern than it would if it were to liquidate its assets under a Chapter 7 filing. Furthermore, SCI competes in a market that is regulated by the Federal Communications Commission (FCC) and other government entities. These regulators could have an interest in maintaining SCI as one of the big four mobile carriers in the US in order to promote competition.

SCI has a strong incentive to affirm the spectrum lease in the event of a Chapter 11 bankruptcy due to the spectrum portfolio's importance to SCI's business operations. The spectrum portfolio includes spectrum in the 2.5 GHz band and 1.9 GHz band comprising about 14% of Sprint's total spectrum holdings on a MHz-pops basis. Approximately 74% of Sprint's 2.5 GHz-enabled sites and approximately 33% of Sprint's 1.9 GHz-enabled sites are using licenses in the spectrum portfolio. SCI's loss of the spectrum portfolio would result in reduced speeds and increased network congestion in certain markets, likely resulting in a loss of customers.

The subsidiary guarantors under SCI's credit agreement jointly and severally guarantee SCI's payment obligations under the spectrum lease. The claim on this guarantee ranks pari passu with SCI's credit agreement, which Moody's currently rates Ba2, and the claim on the guarantee is secured on an equal and ratable basis by any assets of Sprint and SCI's operating subsidiaries that secure the credit agreement and SCI's credit agreement with Export Development Canada, or any replacement credit agreement up to $3.5 billion. In the event that SCI were to file for Chapter 7 bankruptcy, or were to file for Chapter 11 bankruptcy and reject the lease, the lessors would have a liquidated damages claim for the present value of the future spectrum lease payments, less any mitigation from the sale of the spectrum portfolio. Because the present value of the lease payments significantly exceeds the balance of the notes, even a relatively low 50% recovery on the guarantee claim would be sufficient to repay the Class A notes in full.

The value of the spectrum portfolio was a secondary component of Moody's analysis due to the low number of comparable spectrum license sales, particularly for 2.5GHz spectrum licenses, the illiquidity of the secondary market and the potential volatility of market prices for spectrum licenses. Spectrum license values depend on many factors, including the buyers' existing spectrum holdings, license coverage, market share and technical capabilities, as well as expectations for mobile data demand, subscriber growth and future business plans. Future technological advances in spectral efficiency could also affect the value. Sprint hired a third-party consultant who provided an appraisal of $12.5 billion for the future market value of the spectrum portfolio as of 1 March 2018, down from their October 2016 appraisal value of $16.4 billion. However, the value of the spectrum portfolio at any point over the life of the notes is uncertain, because future market conditions can vary significantly from those assumed in the appraisal. Also, the issuer may need to dispose of the spectrum portfolio at a time when market conditions are unfavorable, and there may be a high negative correlation between the probability of SCI defaulting on the lease and the value of spectrum. As such, Moody's assumed that the spectrum would be sold at a value that reflects a stressful market environment.

When analyzing the sufficiency of the liquidity reserve, Moody's looked at both the time it would take to dispose of the spectrum portfolio and the time it would take to recover on the guarantee. Both of these processes would take place concurrently, so the liquidity reserve would need to cover interest and expenses over the longer of these two expected timelines. Based on Moody's analysis, a liquidity reserve sized to cover 18 months of interest and expenses is sufficient, given the Baa2 (sf) ratings on the notes.

Methodology Underlying the Rating Action:

The principal methodology used in these ratings was "Moody's Approach to Rating Credit Tenant Lease and Comparable Lease Financings", which was published in October 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Factors that would lead to an upgrade or downgrade of ratings:

Up

Moody's could upgrade the ratings of Class A notes if (1) the credit quality of the lessee were to improve, as reflected in an upgrade of the lessee's corporate family rating, (2) the importance of the licenses to the lessee were to materially increase, or (3) the value of the spectrum collateral were to materially increase.

Down

Moody's could downgrade the ratings of Class A notes if (1) the credit quality of the lessee were to deteriorate, as reflected in a downgrade of the lessee's corporate family rating, (2) the importance of the licenses to the lessee were to materially decrease, or (3) the value of the spectrum collateral were to materially decrease.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1116616

The analysis relies on an assessment of collateral characteristics to determine the collateral loss distribution, that is, the function that correlates to an assumption about the likelihood of occurrence to each level of possible losses in the collateral. As a second step, Moody's evaluates each possible collateral loss scenario using a model that replicates the relevant structural features to derive payments and therefore the ultimate potential losses for each rated instrument. The loss a rated instrument incurs in each collateral loss scenario, weighted by assumptions about the likelihood of events in that scenario occurring, results in the expected loss of the rated instrument.

Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Gideon Lubin
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Tracy Rice
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be reckless and inappropriate for retail investors to use MOODY’S credit ratings or publications when making an investment decision. If in doubt you should contact your financial or other professional adviser.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.