Verizon Master Trust looks to raise $1 billion on mobile device payments - Asset Securitization Report

The Verizon Master Trust is revving up for its 2023 asset-backed securities issuance with a woody secured by a revolving excavation of outgo plans connected mobile devices, some to mundane consumers, and to an expanding extent, concern accounts with three-year indebtedness plans.

Expectations for securitization issuance person been dampened for this year, but VZMT 2023-1, arsenic the woody is known, volition connection $1 cardinal successful asset-backed notes done a subordinate superior operation with 3 tranches, according to Moody's Investors Service, which intends to delegate ratings to the notes.

Most of the obligors successful the excavation are seasoned Verizon customers with precocious FICO scores, which travel successful astatine a weighted mean (WA) FICO people of 723, the standing bureau said. VZMT 2023-1 has much than 33 cardinal lawsuit accounts person relationship tenures of 113 months, connected a WA basis.

Verizon has offered concern instrumentality outgo plans since 2016, but lone began securitizing those proceeds successful 2021, Fitch noted. Historically, 24-month plans made up the bulk of the instrumentality outgo contracts, but Verizon gradually extended that to 36 months. Now concern instrumentality plans relationship for up to 10% of the VZMT 2023-1's plus pool, according to Fitch.

VZMT has immoderate imaginable vulnerability to a duration mismatch, according to Fitch. The deal's assets wage fixed involvement rates, portion up to 30% of the people A notes mightiness wage a coupon based connected compounded Secured Overnight Financing Rate (SOFR). All of the notes person a ineligible last maturity day of Jan. 22, 2029.

Wells Fargo Securities, BofA Securities, SMBC Nikko and TD Securities are underwriters connected the deal, according to Fitch. Cellco Partnership, a wholly owned Verizon subsidiary that Fitch said is financially strong, volition work the notes.

Aside from subordination, VZMT 2023-1 benefits from a reserve account, overcollateralization (OC) and excess spreads, Fitch said. Also, a currency reserve relationship provides liquidity to the transaction, Fitch said.

Yet Fitch besides noted a fewer inherent strengths to the deal. For one, the standing bureau says, consumers usage their astute phones often and they thin to prioritize payments for high-use products. Another payment is the comparatively accelerated amortization among the assets. VZMT consists of afloat amortizing installment plans with mean remaining presumption of 26 months. Some 58% of them are eligible for upgrades, which could accelerate prepayments, Fitch said.

Fitch expects to delegate ratings of 'Aaa' to the A-1a and A-1b notes; 'Aa1' connected the people B notes; and 'A1' connected the people C notes.