Servpro Master Issuer seeks to raise $495 million in asset-backed securities, to refinance outstanding notes from the Servpro 2019-1 class A1 notes, fund general corporate purposes and fund certain transaction accounts.
Barclays Capital is sole structuring advisor and book-running manager, according to ratings analysts from Kroll Bond Rating Agency. The current transaction will issue notes through two A classes of notes, both of which have earned BBB ratings from KBRA. They share a final maturity date, January 2054, although the A-1 and A-2 notes have anticipated repayment dates of January 2029 and January 2031, respectively.
SERVPRO provides property cleaning and restoration services, in a market known as damage remediation.
Revenue from existing and future franchise and development agreements, product-supply contracts, call center payments, document restoration assets, vendor commissions, plus other assets like intellectual property will secure the notes, the rating agency said.
Further, franchise royalty revenues make up the lion's share (about 83.9%) of incoming securitized revenues, KBRA said. This makes sense, considering that franchise locations make up all of SERVPRO's 2,204 locations across 49 states, the District of Columbia, and Canada. This composition is also a positive for the transaction, according to KBRA.
"A high franchise percentage and a large franchisee base should generally results in a more stable stream of recurring royalty cash flows," KBRA said.
Aside from the collateral makeup, several features work in the deal's favor, from a credit perspective. The A1 and a2 notes receive interest on a pro rata basis, while, the A1 notes receive ultimate principal before the A2 notes, unless certain conditions are met, KBRA said.
One class of notes the $500 million, A-2 notes, also have a bump-up feature that could increase the amount in that class to $570 million, according to the rating agency. As for the deal's leverage, KBRA puts it at about 6.6x, assuming the full potential of the series 2024-1, class A-2 notes, $570 million.
The trust will pay interest on a quarterly basis, and has several other features that could impact the terms of the notes. After October 2029, the 2024-1 A1 notes have two, one-year extension options. The class A2 notes, for their part, feature scheduled amortization of 1% per annum prior to the Anticipated Repayment Date, unless certain conditions are met, KBRA said.
