DBRS Morningstar Confirms Ratings on Vertical Bridge Secured Tower Revenue Notes Series 2018-2

DBRS, Inc. (DBRS Morningstar) confirmed its ratings on all notes (the Notes) issued by Vertical Bridge Secured Tower Revenue Notes Series 2018-2:

-- Class A Notes at A (high) (sf)
-- Class B Notes at A (low) (sf)
-- Class C Notes at BBB (sf)

The rating confirmations are based on the following analytical considerations:

-- The transaction assumptions consider DBRS Morningstar’s set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19), available in its commentary “Global Macroeconomic Scenarios: December Update,” published on December 2, 2020. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which have been regularly updated. The scenarios were last updated on December 2, 2020, and are reflected in DBRS Morningstar’s rating analysis.

-- The assumptions consider the moderate macroeconomic scenario outlined in the commentary, with the moderate scenario serving as the primary anchor for current ratings. The moderate scenario factors in increasing success in containment during the first half of 2021, enabling the continued relaxation of restrictions.

-- DBRS Morningstar does not believe that additional stresses are warranted in the cash flow analysis at this time. The stresses applied and certain characteristics of the underlying cell towers listed below provide ample credit protection against current coronavirus projections.

-- There has been no notable impact on the transaction’s performance since the beginning of the coronavirus pandemic in March 2020.

-- The tower sites serve as vital infrastructure whose purpose and use have only increased in importance amid the global coronavirus pandemic with remote working and learning as more people spend the majority of their days at home, which drives greater mobile device usage and demand for voice and data transmission services.

-- New technology development that is unaffected by the coronavirus, such as the ongoing rollout of 5G, drives higher demand for these towers and leasing of space on these towers.

-- The structural features of the transaction, such as the cash trap mechanism and amortization period triggers, which will help to accelerate the paydown of the Notes’ balance if the business environment deteriorates.

-- Evidence of stable cash flows with modest growth since deal inception, with consistent annualized run rate revenue and annualized run rate net cash flow generation over time. The debt service coverage ratio has also remained stable over time with ample cushion against cash trapping and amortization period triggers.

-- The largest tenants, iHeart Media, Inc. and Cumulus Media, Inc., have demonstrated the mission-critical nature of cell towers through their respective bankruptcies with all of their leases affirmed and no disruption of lease payments to Vertical Bridge REIT, LLC (Vertical Bridge). Both companies have emerged from bankruptcy with deleveraged balance sheets.

-- The mission-critical nature of the assets, which are perceived as vital to the continuity of each tenant’s operations as well as to the overall daily functioning of the general economy through media, telecommunications, technology, and data transmission.

-- Vertical Bridge’s market position as the largest private company managing cell towers, combined with its history of portfolio growth and successful tower acquisitions, supports its long-term financial prospects.

-- The transaction parties’ capabilities with regard to origination, underwriting, and servicing.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

This press release was amended on March 3, 2021, to reflect the U.S. ABS General Ratings Methodology (December 2018), as the previously released press release inadvertently mislabeled the methodology used.

Notes:
The principal methodology is U.S. ABS General Ratings Methodology (December 2018), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

The rated entity or its related entities did not participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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