The Verizon Master Trust 2023-4 is preparing to issue $800 million in asset-backed bonds, secured by a much larger pool of revenue from mobile device payment plans compared with previous deals.
VZMT 2023-4, as the deal is known, looks larger than previous transactions by a number of measures. It has a total principal balance amount of $22.4 billion, the largest number of receivables at a little more than 41 million, and 20 million accounts, according to ratings analysts at Moody's Investors Service. Even though a growing number of mobile device customers are used to 24- and 36-month contracts, the latter hasn't been prevalent in previous securitizations. Such a limited performance history casts a potential credit negative over the notes.
The deal structure also includes a revolving period that can last up to 36 months before the start of its expected redemption date or amortization, Moody's said. The revolving period might cause changes in the trust's pool quality as the deal sponsor, Verizon Wireless, adds new receivables, Moody's said.
Yet ratings analysts from both Moody's and S&P Global Markets pointed to a number of features that could offset any credit negatives. Mobile devices are a high-utility product, which are likely to be high on customer's payment priorities, Moody's said.
Further Verizon is an experienced servicer, and other Verizon entities are taking key roles on the deal, such as originator and depositor, according to S&P.
BofA Securities is acting as lead underwriter on the deal, while SMBC Nikko Securities America and TD Securities are acting as managers on the transaction.
Most of the transaction will offer investors fixed-rate notes through four tranches. The only exception would be the class A-1b, which will offer notes priced over the Secured Overnight Financing Rate (SOFR), according to Moody's and S&P ratings analysts.
Moody's will assign 'Aaa' ratings to the senior notes, and 'Aa1' and 'A1' to classes B and C, respectively. S&P assigns 'AAA' to the class A tranches, and 'AA' and 'A+' to the classes B and C.
All of the notes have a legal final maturity of June 20, 2029.
