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AT&T borrows $2.3B against handset finance pool

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AT&T has obtained $2.3 billion this month borrowed against a pool of device payment plan agreements extended to AT&T Mobility customers.

Fitch Ratings has assigned a single-A structured finance rating to AT&T Receivables Funding LLC December 2019 investment, which is the company’s first debt raising against DPPs since September and the most recent to be rated by Fitch since June.

Over 95% of the agreements are consumer contracts that finance interest-free purchases of cell phones and other devices serviced by AT&T Mobility (with the remainder culled from AT&T’s business customer segment).

The consumer loans are from AT&T’s low and medium-rated underwriting risk tiers; Fitch assigned a base case default rate of 4.8% for the consumer receivables in the pool, which serve as collateral for the investment.

The deal benefits from 17.55% credit enhancement, provided solely through overcollateralization.

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