$70 million of asset-backed securities rated.
New York, March 03, 2011 -- Moody's Investors Service (Moody's) has assigned provisional ratings to
the Class C Secured Tower Revenue Notes, Series 2011-1,
to be issued by GTP Acquisition Partners I, LLC (Issuer).
The Issuer is an indirect wholly owned subsidiary of Global Tower Holdings,
LLC (GTP), a wireless tower operator which in turn is controlled
by affiliated funds of The Macquarie Group. Moody's also stated
that its ratings on the existing series of notes previously issued by
the Issuer are not expected to be downgraded or withdrawn solely as a
result of this prospective issuance.
The complete rating actions are as follows:
Issuer Entity: GTP Acquisition Partners I, LLC
$70,000,000 Class C Secured Tower Revenue Notes,
Global Tower Series 2011-1, rated (P) A2 (sf)
GTP is a leading independent (non-carrier) owner/operator of wireless
towers in the U.S. The Issuer has the ability to issue multiple
series of notes and has previously issued the Series 2007-1 Notes
(the Existing Notes) consisting of seven subclasses totaling $480,250,000
with an Anticipated Repayment Date (ARD) of May 15, 2012,
and legal final maturity of May 15, 2037.
The Issuer plans to issue $70,000,000 Class C,
Secured Tower Revenue Notes, Series 2011-1, (the Offered
Notes, and together with the Existing Notes, the Notes) with
a June 2016 ARD. The Offered Notes will rank pari-passu
with the Class C of the Existing Notes. Thus, if an Amortization
Period (which includes a failure by the Issuer to repay the Existing Notes
on their respective ARD) commences, the Issuer will be required
to make principal payments on the Offered Notes in accordance with the
priority of payments.
In connection with the proposed issuance, the Issuer will not add
tower sites to the pool. Thus, the collateral for the Notes
will continue to consist of 2,027 wireless communications sites
(towers) that are mostly owned or leased by the Issuer or one of its subsidiaries.
Space on the towers is in turn leased to a variety of users, primarily
major wireless telephony carriers. As of February 2011, this
tower pool had an annualized run rate net cash flow of approximately $76
million. Moody's assessed value for the tower pool was approximately
$725 million, and the Offered Notes have a cumulative-loan-to-value
(CLTV) ratio of approximately 49.5%. The CLTV ratio
reflects the CLTV ratio of the combined amounts of the Offered Notes and
the Existing Notes Classes A, B and C. See Principal Methodology
below for list of the assumptions applied.
The provisional ratings of the Offered Notes are derived from an assessment
of the present value of the net cash flow that the tower pool is anticipated
to generate from space licenses (leases) on the towers, compared
to the cumulative debt being issued at each rating category.
The primary risks for the value of the tower pool are wireless technology
risk and tower re-leasing risk. Technology risk relates
primarily to the potential emergence of competing technologies that could
obviate the need for wireless towers and adversely affect future lease
revenues. We are not aware of competing technologies which could
materially displace towers and believe that the tower infrastructure is
becoming increasingly entrenched as demand for wireless applications grows.
There are few viable displacement technologies on the horizon such as
Distributed Antenna System (DAS) and Alcatel-Lucent's recently
announced lightRadios. We view these technologies as complimentary
to the current tower based wireless networks as these technologies are
primarily effective in densely packed urban areas where the portfolios
of the wireless tower companies have limited presence.
Re-leasing risk refers to the potential for lease rates to fluctuate
downward upon renewal, since the transaction is subject to renewals.
This could occur due to overbuilding or due to pressure from wireless
carriers should their own businesses experience significant margin compression.
Due to zoning restrictions and public pressure we do not view overbuilding
as a present risk. This also provides some insulation against price
risk by limiting the alternatives that a wireless carrier has.
The principal methodology used in rating the transaction is summarized
below. Other methodologies and factors that may have been considered
in the process of rating the Notes can be found on www.moodys.com
in the Rating Methodologies sub-directory.
Finally, it should be noted that Moody's ratings address only the
credit risks associated with the transaction. Other non-credit
risks, such as those associated with repayment on the Anticipated
Repayment Date, the timing of any principal prepayments, the
payment of prepayment penalties and the payment of Post-ARD Additional
Interest have not been addressed and may have a significant effect on
yield to investors.
RATINGS OF OUTSTANDING SERIES UNAFFECTED
As mentioned, the Offered Notes and the Existing Notes will be supported
by the same tower pool. The Offered Notes will rank pari passu
with Class C of the Existing Notes, be subordinated to the Existing
Notes Classes A and B, and Senior to the Existing Notes Classes
D,E,F and G. Moody's concluded that the ratings
of the Existing Notes should not be affected by the issuance of the Offered
Notes. This is because Moody's current assessed value of
the tower pool is greater than the value expected at the time the Existing
Notes were issued; as such, the Offered Notes are essentially
issued against this excess value.
The excess value that supports the issuance of the Offered Notes stems
from two sources: performance and change to the ratings methodology.
Since the Existing Notes were issued in 2007, the performance of
the pool, as evidenced by the increased net cash flows, exceeded
Moody's initial expectations. In addition, on February
3, 2011, Moody's revised the rating methodology for
wireless tower-backed securitizations by lowering discount rates
used to derive the assessed value of a tower pool, which resulted
in an increase in the assessed value for the tower pool underlying the
MOODY'S V-SCORE AND PARAMETER SENSITIVITIES
V Score - The V Score for this transaction is Medium or Average.
The V Score indicates "Average" structure complexity and uncertainty about
critical assumptions. The Medium or average score for this transaction
is driven by the Medium score for historical sector and issuer performance
and data and Medium transaction governance. The Medium for historical
performance and data for the sector is attributed to the fact that the
data dates back only fifteen years or so, while securitization data
go back only about five years. The Medium for the Issuer's historical
performance and data is derived from our view that even though GTP is
relatively young and has existed for less than ten years, we think
that historical performance is a good indicator for future performance
due to the nature of the assets and the sector. Finally,
the Medium for transaction governance is mainly because of the limited
experience of GTP in securitizations having done only two such transaction
in 2007 and 2010 and the fact that GTP is an unrated and relatively small
company compared to the other publicly traded cell tower operators.
Moody's Parameter Sensitivities -- In the ratings analysis
we use various assumptions to assess the present value of the net cash
flow that the tower pool is anticipated to generate. Based on these
cash flows, the quality of the collateral and the transaction's
structure, the total amount of debt that can be issued at a given
rating level is determined. Hence, a material change in the
assessed net present value could result in a change in the ratings.
Therefore we focus on the sensitivity to this variable in the parameter
sensitivity analysis. Specifically, if the net cash flows
that the tower pool is anticipated to generate is reduced by 5%,
10% and 15% compared to the net cash flows used in determining
the initial rating, the potential model-indicated ratings
for the Offered Notes would change from (P)A2 (sf) to (P)A3, (PBaa1,
and (P) Baa2 respectively.
Parameter Sensitivities are not intended to measure how the rating of
the security might migrate over time, rather they are designed to
provide a quantitative calculation of how the initial rating might change
if key input parameters used in the initial rating process differed.
The analysis assumes that the transaction has not aged. Furthermore,
parameter Sensitivities only reflects the ratings impact of each scenario
from a quantitative/model-indicated standpoint. Qualitative
factors are also taken into consideration in the ratings process,
so the actual ratings that would be assigned in each case could vary from
the information presented in the Parameter Sensitivity analysis.
The principal methodology used in rating the GTP transaction was "Moody's
Approach to Rating Wireless Towers-Backed Securitizations:
A Path to Clear Reception in the ABS Market", published in September
2005 and amended on February 3, 2011 to reflect the change in discount
rates and available on www.moodys.com in the Rating Methodologies
subdirectory under the Research & Ratings tab. Other methodologies
and factors that may have been considered in the process of rating this
issuer can also be found in the Rating methodologies sub-directory
on Moody's website.
As described therein, we derive an asset value for the collateral
which in turn is compared to the proposed bond issuance amounts.
In deriving the value of the assets, Moody's viewed the historical
operating performance of the Issuer, the historical performance
of the securitized pool, evaluated and analyzed comparable public
company data and market information from various third party sources.
The following are the key assumptions used in the quantitative analysis:
(i) Revenue Growth -- for wireless voice/data two sources
of revenue growth were assumed: first, lease escalators which
were based on the tenants' contractual obligations were assumed to be
fixed at 3.25%; second, organic growth that resulted
in the addition of approximately 0.44 tenant per tower in total
over a period of four years. Revenues from broadcasting were assumed
to decline on a continuous basis over a 15 year period to a third of current
levels, and data/other revenues were assumed to decline to zero
based on a triangular distribution ranging from five to ten years.
(ii) Operating Expenses -- were assumed to vary such that
net tower cash flow margins ranged from 65% to 80% based
on a triangular distribution. (iii) Maintenance Capital Expenditures
- were assumed to be $725 per tower per annum, and
to increase by 2% to 4% every year. (iv) Tenants'
Probability of Default (wireless voice/data tenants) - Moody's
"Idealized" default rate table was applied, using the actual ratings
of the Tenants who were rated and assuming near-default ratings
for others; (v) Recovery Upon Wireless Tenant Default --
were assumed to be zero the year following the default and recover to
80% for large carriers and to 50% or 60% for small
carriers of pre-default revenues over the next two years;
(vi) Discount Rate - the discount rate applied to the net cash
flow was assumed to vary between 8.5% and 13.00%;
(vii) Finally, adjustments were made to the total amount of debt
that can be issued at the requested rating level, because the Offered
Notes and the Outstanding Class C Notes account for a larger percentage
of the total debt outstanding compared to most similarly rated classes
in the prior transactions; therefore these classes have lower severity
of loss risk.
Moody's Investors Service did not receive or take into account a third
party due diligence report on the underlying assets or financial instruments
in this transaction.
Additional research for this transaction is available at www.moodys.com.
The special report "Updated Report on V Scores and Parameter Sensitivities
for Structured Finance Securities" is also available on www.moodys.com.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's Investors
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
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.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns provisional ratings to wireless tower backed notes sponsored by GTP
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