Vertical Bridge, the largest independent wireless tower owner and operator in North America, is readying it fourth asset-backed securities (ABS) deal, a transaction that pay down all previous and outstanding series.
By the time the deal closes, according to a pre-sale report from Moody’s Investors Service, the VB-S1 Issuer, Series 2022-1 notes will be the only ones outstanding from the program. Moody’s will rate three classes from the deal, which has an initial note balance of $1.3 billion in notes.
The collateral pool consists of lease revenue on 3,526 tower sites, and as of November 30, 2021 the pool had an annualized run rate net cash flow of around $115 million. Moody’s noted that the cell tower sector’s favorable outlook, the sponsor company’s strong contractual cash flows, favorable structural elements, among other deal features work in the deal’s favor from a credit perspective.
The fundamentals of the wireless infrastructure industry are favorable and should remain so over the next several years. As carriers continue to implement 5G networks, the demand for towers will rise considerably owing to the 5G technological requirements.
Vertical Bridge also enjoys lucrative lease contracts from the three biggest wireless carriers – T-Mobile USA, AT&T Corp., and Verizon Communications, which contribute 66% of the portfolio’s annualized run rate revenue (ARRR). About 86% of the ARRR comes from wireless telephone and data tenants.
The collateral has, on a weighted average basis:
- a remaining current tenant lease terms of 4.8 years
- a remaining final tenant lease terms of
- an annual escalator of 2.6%
Moody’s also noted that Vertical Bridge has an experienced and long-standing senior management team. Midland Loan Services, a division of PNC Bank, will service the notes.
In terms of ratings, Moody’s expects to assign ‘A2’ provisional ratings to all of the classes of notes that it will rate – class C-1 VFN, class C-2-I and class C-2-II.
