Adams Outdoor Advertising is issuing notes worth up to $667 million, secured by the company's title and interest in more than 9,000 outdoor advertising sites.
Adams Outdoor is one of the largest U.S. outdoor advertising companies, providing services in 12 markets and their surrounding areas in the Midwest, Southeast and Mid-Atlantic, said Kroll Bond Rating Agency (KBRA).
Assets included in the collateralization include transit displays, mall displays, parking garage displays, production services, and online services, as well as permits, licenses, contracts, ground leases, real property, and deposit amounts in the liquidated billboard asset sub-account. They also include collections and transaction accounts.
According to KBRA, as of March 31, Adams operated 9,917 advertising displays, including 3,700 bulletins, 5,849 posters, 342 digital displays, and 26 other display types. The portfolio's net outdoor advertising revenues and eligible net cash flow were approximately $144 million and $82.9 million, respectively.
The Adams Outdoor Advertising Limited Partnership Series 2023-1 senior secured notes are being issued in four classes: A1, A2 ($459 million), B ($64.4 million) and C ($83.6 million). Class A initial funding at closing is expected to be zero, but with an upsize provision capped at $60 million, Fitch Ratings said. Including the $60 million, the four classes total $667 million.
Classes A-2, B, and C notes are fixed-rate, interest-only, while class A-1 is a variable funding note, uncapped and benchmarked to the Secured Overnight Financing Rate (SOFR). All classes are being privately placed, Fitch said.
The transaction structure is a master trust, and, as such, the indenture permits the issuance of additional classes and series of notes subject to certain conditions including rating agency confirmation, KBRA said. The issue has senior/subordinate enhancement.
Barclays and Morgan Stanley are the underwriters for the issue, which closes on July 28. The servicer is Midland Loan Services, a division of PNC Bank.
The proceeds of the Series 2023-1 notes, net of expenses and initial sub-account deposits, will be used to fully pay down the outstanding Series 2018-1 and Series 2021-1 notes, fund a distribution to equity owners of the issuer's indirect parent companies and for general corporate purposes, KBRA said.
Since the transaction isolates the assets from the parent company, Fitch based its rating on a structured finance analysis of the cash flows from advertising structures, not an assessment of the ultimate parent's corporate default risk.
Due to the specialized nature of the collateral consisting primarily of outdoor advertising displays and lack of mortgages, the senior classes of this transaction do not achieve ratings above A, Fitch said.
Amongst Adams Outdoor Advertising's credit strengths are its experienced sponsorship and management team, which has been operating since 1983, Fitch said. The company has shown consistent performance and has effectively managed its operations through economic cycles, the rating agency said. Another strength is its dominant position in the midsize markets where it operates. Its average 83% market share in these areas adds to the predictability of the cash flow by minimizing pricing pressure from competition.
Fitch expects to assign A- to classes A1 and A2, BBB- to class B, and BB- to class C. KBRA expects to assign A, BBB and BB-, respectively, to the same classes.
