American Water Resources is managing a $1.7 billion securitization of revenue from home service contracts, utility and municipality partner agreements and contractor agreements, selling the notes through the OHS Issuer series 2026-1 and 2026-2.
The inaugural deal for American Water uses a master trust structure, and can issue additional classes and series of notes, as long as the underlying collateral meets certain conditions, according to Kroll Bond Rating Agency. OHS Issuer will sell the notes through six tranches of class A and B notes covering both series of notes, which are expected to repay January 2031.
Oncourse is one of the country's leading providers of home infrastructure warranties for single-family homes across the U.S. The contracts cover exterior service agreements, including the repair or replacement of private service lines such as water pipes from the street to a home. Other service contracts cover interior home systems, such as heating, ventilation and air conditioning, and appliance warranties on washers and dryers.
Analysts at Moody's Ratings said that the warranties are primarily through partnerships with utilities and municipalities.
OHS Issuer's notes have a final repayment date of January 2061, Moody's said.
Notes will be repaid from monthly payment cash flows, Fitch Ratings said. Moody's noted that for the twelve months ended on Aug. 31, 2025, the securitized pool generated about $525 million in gross revenue, and $220 million in pro forma securitized net cash flows, Moody's said.
Jefferies is the sole structuring advisor and lead bookrunner, according to KBRA.
OHS Issuer's liquidity includes a reserve account, funded at closing, that covers any payment shortfalls and unpaid claims. There is also a liquidity funding note, a delayed-draw facility up to $25 million to meet interest and other senior expenses whenever the deal needs it, according to Moody's.
The deal structure includes subordination, but repayment follows a structure where senior fees are paid first, followed by monthly interest to all outstanding classes of notes.
There is also a cash trap and sweep provision, KBRA said. On any payment date, if the senior debt service coverage ratio (DSCR) is less than or equal to 1.80x, then half of available funds will be diverted to the cash trap reserve account.
KBRA assigns BBB- to classes A1 and A2 notes from the 2026-1 and 2026-2 series; and BB- to the class B notes of both series.
Moody's assigns Baa1 to the 2026-1 class A1L tranche; Baa2 to the 2026-1, class A1V; Baa2 to class A2 of series 2026-1 and 2026-2; and Ba3 to class B of the 2026-1 and 2026-2 series.
