Fitch Ratings has updated its “U.S. Wireless Tower and Network Site Transaction Rating Criteria,” replacing the prior criteria dated December 2020.
Three revisions to Fitch’s methodology may affect debt proceeds at certain rating categories for wireless towers:
- Fitch has revised the range of allowable refinance constants to 7.50-9.75 percent from 9.25-11.50 percent.
- The criteria now allow for up to 25 basis points of adjustment to the debt service coverage ratio hurdles for exceptional structure, tenancy, sponsorship, and collateral quality.
- Leverage multiple caps at investment-grade and “AAAsf” levels were removed, simplifying the rating variables under a single approach.
Fitch says that these changes are supported by more than 15 years of operating history with little to no rating volatility on Fitch’s rated portfolio.
While the changes allow for incremental leverage at each rating category, Fitch does not expect rating changes given caps on senior classes and ‘additional debt’ provisions in existing deals.
The changes allow for greater differentiation among transactions and allow for maximum leverage at the “A” category of approximately 10x Fitch net cash flow for transactions with the strongest credit attributes.
Primary considerations include proportion of investment-grade tenancy, telephony tenants and assets in the top 100 Basic Trading Areas BTAs; sponsor quality, including scale and creditworthiness; and protections in the liability structure such as amortization and triggers.
Transactions backed by small cell or DAS collateral are expected to achieve leverage levels toward the low end of the current allowable range compared with ground leases, which tend to be on the higher end. Many of the traditional [tower] portfolios will be aligned with the middle of the range.
The report outlines Fitch’s approach to rating wireless tower and wireless network site securitizations. Fitch uses a multidisciplinary approach led by its structured finance team.
By John Celentano, Inside Towers Business Editor
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