Zayo Group, which provides communications and fiber network infrastructure to customers in the U.S. and Canada, is preparing to sell $2.3 billion in asset-backed securities (ABS), from a pool of contracts on primarily dark fiber and wavelength services.
Zayo Issuer, series 2026-1 and 2026-2, uses a master trust structure that will initially issue five tranches of classes A, B and C notes, and can issue additional classes as long as they meet certain conditions and have rating agency confirmation, according to the Kroll Bond Rating Agency.
Both note sales have a closing date of May 29, KBRA said, and Barclays is the sole structuring agent and joint bookrunner for both transactions, according to KBRA and Asset Securitization Report's deal database.
The 2026-1 series, with an A2, B and C tranche, has a final maturity date of April 2056. The two 2026-A2 and B tranches have an April 2036 final maturity date, KBRA said.
The rating agency assigns A- to the A2 tranches of both series, which also hold the bulk of the outstanding notes. The class B notes in both series are rated BBB, and the class C tranche, from 2026-1, is rated BB-.
The deal structure includes interest payments to all outstanding classes of notes after senior fees are paid, KBRA said.
Outside of fees and interest, Zayo Issuer 2026-1 and 2026-2 will use subordination to pay down the other outstanding classes of notes.
The deal also has several mechanisms to boost credit to the notes, including a liquidity reserve account. It will set aside six months of fixed direct costs, senior fees, and interest on classes A and B, plus three months of interest on the class C notes, KBRA said.
Zayo will also use a cash trap and sweep provision. If on any payment date the senior debt service coverage ratio (DSCR) is 1.70x or less, then a 50% cash trap period will begin. During the cash trapping period, the cash trap reserve account and the Capex reserve account will receive 25% and 75% of the cash trapping percentage, respectively, KBRA said.
If the cash trap period lasts longer than six months, then half of available funds will be used to repay all classes of notes in sequential order.
The transaction structure also includes a rapid amortization period that will begin if the senior DSCR falls below 1.50x on any payment date, the rating agency said.
Fiber and transport services represents majority of the pool (69.7%) by monthly recurring revenue, KBRA said.
