A revolving pool of consumer mobile contracts—predominantly on smartphones—will secure an $842 million asset-backed securities (ABS) deal coming from the T-Mobile U.S. Trust 2022-1 transaction.
The deal is the first mobile device financing ABS from T-Mobile Financial, or Finco, according to information from Moody's Investors Service.
Several aspects of the collateral lend strength to the credit of the notes, according to Moody's. Along with sponsoring the deal, T-Mobile Financial will act as servicer on the notes, and the rating agency notes that the company employs effective default mitigation practices. Further, the collateral has a fast amortization timeline after the two-year revolving period, a high quality customer base, and the fact that cell phones, which comprise 93.8% of the pool, are a high utility product, Moody's said.
As for its customer base, the collateral pool has a customer tenure of some 67 months, on a weighted average (WA) basis, according to Fitch Ratings, which also expects to assign ratings to the notes. Just 25.6% of customers have a 12-month tenure, according to Fitch.
Also on a WA basis, the borrowers associated with the underlying collateral have a FICO score of 706, according to Fitch. The collateral appears to be diversified, at least geographically. California accounts for the largest ratio of obligors by state, at 18.1%. Texas and Florida follow, with 11.5% and 10.2%, respectively, according to Fitch.
None of the assets, liabilities or hedges have any exposure to Libor, which Fitch considers more of a neutral consideration.
Fitch notes that the deal, which will repay the notes through a junior note subordination structure, also has sufficient credit enhancement through initial hard credit enhancement, among other provisions. T-Mobile U.S. Trust, 2022-1, also benefits from overcollateralization and a non-declining 1.00% reserve account.
RBC Capital Markets is the deal's underwriter, which will issue the notes through three classes, according to Moody's.
Fitch Ratings expects to assign ratings of 'AAA' on the $750 million, class A notes; plus 'AA' and 'A' on classes B and C, respectively, both of which should issue $46 million.
All of the notes have a legal final maturity date of May 22, 2028.
For its part, Moody's expects to assign ratings of 'Aaa' to the class A notes; and 'Aa1' and 'Aa3' to classes B and C.
