Authority Brands' third asset-backed securitization will offer $461 million in securities to investors, backed by revenues from its home services franchise brands, from pet services to lawn care.
The transaction AB Issuer, 2026-1, will sell the notes through an A1 VFN and an A2 tranche, under a master trust structure, according to analysts at Kroll Bond Rating Agency and Morningstar DBRS.
The A1 VFN is a variable funding note whose proceeds can be used for general corporate purposes, including acquisitions, DBRS said.
Additional drawdown amounts are subject to specific availability conditions. One is that the senior WBA leverage ratio must be less than or equal to 5.50 times, DBRS said.
The bulk of AB Issuer 2026-1's notes will be from the A2 senior term notes, at $286 million, the rating agencies said.
The A1-VFN and A2 tranches have anticipated repayment dates of April 2029 and April 2031, respectively, but an April 2056 legal final maturity date overall, the rating agency said.
KBRA assigns BBB to all the notes. DBRS assigns (P) BBB (sf) to the notes.
AB Issuer 2026-1's structure includes schedule amortization for the A2 notes of 1.0% per annum prior to its anticipated repayment date, unless the senior WBS leverage ratio is less than or equal to 5.5x, according to KBRA.
There is a reserve account for the senior notes, which covers three months of class A note interest payments, KBRA said. The deal includes a cash-trapping debt service coverage ratio (DSCR) threshold of between 1.75x and 1.50x, when 50% of all excess cash flows will be deposited into the cash trap reserve account.
AB Issuer 2026-1 also has a rapid amortization provision that will be triggered if the principal and interest DSCR is less than 1.20x. Should that level be breached, then the transaction will use all cash collections to pay senior expenses, KBRA said.
Ratings on the existing notes are being placed on Watch Upgrade, KBRA said.
While Authority Brands is managing the deal, FTI Consulting is on as backup manager and Morgan Stanley is the sole structuring agent and lead left bookrunner, KBRA said.
Based in Columbia, Maryland, the company offers services in three segments—indoor, outdoor and trades. They include cleaning and in-home care (indoor), pet waste removal and tree maintenance (outdoor) and electrical and disaster restoration (trades), according to Kroll Bond Rating Agency, which assessed the notes.
Authority Brands' website notes that it operates through 15 home service franchise brands, including the American Pool Company, DoodyCalls, Homewatch CareGivers and Lawn Squad. For the 2025 fiscal year, the company booked $2.1 billion in systemwide sales, the company said.
Franchisee royalties and fees will account for a majority of the securitized cashflow to the deal, according to KBRA.
Vendor payments, which are generally recurring, will consist of 11.7% of collections, the rating agency said, adding that the remaining 21.5% of collections will consist mainly of technology and call center fees, synthetic royalties from company-owned stores and product sourcing margin.
