DBRS Morningstar Requests Comments on U.S. Cell Tower ABS Appendices

DBRS Morningstar is requesting comments on the proposed material updates to the following methodologies (RFC Methodologies) to be used to determine credit ratings for the U.S. Cell Tower ABS asset class:
-- Rating U.S. Structured Finance Transactions methodology—U.S. Cell Tower ABS (Cell Tower New Issue Appendix);
-- Operational Risk Assessment for U.S. ABS Originators methodology—U.S. Cell Tower ABS (Cell Tower Originators Exhibit);
-- Operational Risk Assessment for U.S. ABS Servicers methodology—U.S. Cell Tower ABS (Cell Tower Servicers Exhibit);
-- Master U.S. ABS Surveillance methodology—U.S. Cell Tower ABS (Cell Tower Surveillance Appendix).

Upon the close of the Request for Comment period, the above-referenced RFC Methodologies may supersede the U.S. ABS General Ratings Methodology (December 2018) (General Ratings Methodology) in respect of the U.S. ABS Cell Tower asset class. DBRS Morningstar, upon the finalization of the RFC Methodologies, will refer to the U.S. ABS Cell Tower asset class as U.S. Cell Tower ABS. Please refer to the end of the press release for Additional Disclosures.

CELL TOWER NEW ISSUE APPENDIX
Please refer to the Cell Tower New Issue Appendix to the Rating U.S. Structured Finance Transactions methodology which presents the principal asset class methodology that DBRS Morningstar intends to apply to assign new credit ratings in the Cell Tower ABS asset class following the finalization of the RFC Methodologies. The Cell Tower New Issue Appendix provides a discussion of the key analytical and credit considerations, collateral quality and metrics, legal and regulatory considerations, and cash flow analysis applicable to DBRS Morningstar’s analysis of Cell Tower ABS asset class transactions.

Under the proposed Cell Tower New Issue Appendix, DBRS Morningstar incorporates key updates to the methodology that include the approach for: (1) estimating a stabilized net cash flow (DBRS Morningstar NCF) for a cell tower portfolio; (2) capitalizing the DBRS Morningstar NCF to estimate a DBRS Morningstar Value for the Cell Tower portfolio; and (3) applying loan-to value (LTV) ratios that vary based on rating categories to the Cell Tower’s DBRS Morningstar Value to derive ratings.

CELL TOWER ORIGINATORS EXHIBIT AND CELL TOWER SERVICERS EXHIBIT
Please refer to the Cell Tower Originators Exhibit to the Operational Risk Assessment for U.S. ABS Originators methodology and Cell Tower Servicers Exhibit to the Operational Risk Assessment for U.S. ABS Servicers methodology that formalize the sample list of questions DBRS Morningstar expects to use in the operational risk reviews of originators and servicers operating in the Cell Tower ABS asset class upon finalization of the RFC methodologies.

CELL TOWER SURVEILLANCE APPENDIX
Please refer to the Cell Tower Surveillance Appendix to the Master U.S. ABS Surveillance methodology which presents the criteria that DBRS Morningstar intends to apply in connection with the surveillance of new DBRS Morningstar credit ratings in the Cell Tower ABS asset class following the finalization of the RFC Methodologies.

DBRS Morningstar deems the updates to the RFC Methodologies to be material as the Cell Tower New Issue and Cell Tower Surveillance Appendices set forth updated approaches with the addition of a formalized new Cell Tower Originators Exhibit and Cell Towers Servicer Exhibit. DBRS Morningstar will apply the Cell Tower New Issue and Cell Tower Surveillance Appendices in addition to the Cell Tower Originators and Cell Tower Servicers Exhibits to outstanding credit ratings through the surveillance process.

DBRS Morningstar currently rates six classes of notes across two publicly rated U.S. Cell Tower ABS transactions. While no downgrades are expected as a result of these changes, DBRS Morningstar expects outstanding classes to have a combination of confirmations and upgrades if the methodology is finalized in its current proposal.

ADDITIONAL DISCLOSURES
As disclosed in the Notice Regarding the Analytical Integration of DBRS and Morningstar Credit Ratings (Integration Notice) accompanying the General Ratings Methodology, DBRS Morningstar has applied the General Ratings Methodology, effective December 19, 2019, in connection with assigning of new DBRS Morningstar credit ratings, and monitoring outstanding DBRS Morningstar credit ratings, in this asset class (see the following press release for more details: https://www.dbrsmorningstar.com/research/355085). In connection with the finalization of the RFC Methodologies, the Integration Notice will be updated to remove the reference to the U.S. ABS Cell Tower asset class, and the General Ratings Methodology will remain in use in respect of the asset classes referenced in the Integration Notice, as updated.

Comments should be received on or before October 28, 2022. Please submit your comments to the following email address:
sfcomments@dbrsmorningstar.com

DBRS Morningstar publishes on its website all comments received, except in cases where confidentiality is requested by the respondent.

Notes:
The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

DBRS Morningstar methodologies are publicly available on its website www.dbrsmorningstar.com under Methodologies & Criteria.

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