A fast-growing U.S. telco is raising funds for working capital by issuing secured network revenue notes.
Point Broadband is a fiber and wireless voice and Internet service operator serving primarily residential and small-to-medium-sized business customers across rural and underserved regions in the Southeast, Mid-Atlantic, Midwest and Northeast.
Founded in 2017, Point achieved a 20% compound annual growth rate between 2021 and 2024 to become one of the largest independent U.S. rural fiber-to-the-home providers, according to KBRA.
Point Broadband Funding is issuing its first secured network revenue notes from the Point Broadband Funding, Series 2025-1 master trust. The transaction securitizes contract payments, and the debt is secured by cashflow from operations, according to Fitch Ratings. Five classes of senior secured notes are being issued to raise $740.1 million.
The collateral network comprises 306,300 fiber passings and 112,000 subscribers, Fitch said.
According to KBRA, the proceeds from the sale of the notes will be used primarily to repay existing indebtedness, fund the collection and reserve accounts, pay transaction fees, and for general corporate purposes, which may include growth capital expenditures.
The master trust may issue additional classes and series of notes subject to conditions such as ratings agency confirmation. Additional notes would rank subordinate to existing notes, without the benefit of additional collateral, Fitch said. Also, the variable funding structure of the notes would increase debt, without any improvements in cashflow.
The notes benefit from senior/subordinate enhancement, and the closing date for the issue is July 30, 2025, according to the Asset Securitization Report Deal Database.
Fitch has assigned preliminary ratings to the notes as follows. The class A-1-L ($15 million) liquidity funding notes are rated A; class A-1-V ($125 million) and class A-2 ($437.2 million) rated A-; class B ($72.9 million) BBB- and class C ($90 million) BB-.
KBRA's preliminary ratings are A- for the first three classes, BBB for class B, and BB- for class C.
Fitch's ratings reflect cashflows from the network rather than an assessment of the ultimate parent Point Broadband Intermediate's corporate default risk.
Positive factors in Fitch's ratings were the high quality of the underlying collateral networks, scale of the network, market diversity, the market position of the sponsor, capability of the operator, higher barriers to entry and strength of the transaction structure.A negative factor was the potential for changes in technology to affect long-term demand for digital infrastructure. The long-term tenor of the securities (30 years after closing) increases the risk that an alternative technology will be developed that renders obsolete the current transmission of data through fiber optic cables, the rating agency said.
The transaction's sole structuring agent and joint active bookrunner is Morgan Stanley & Co. The guarantor is Point Broadband Guarantor, the manager Point Broadband Acquisition, and the servicer Drivetrain Agency Services. The back-up manager is FTI Consulting, and the indenture trustee is Wilmington Trust, National Association.
