A pool of mobile device payment plans originated and serviced by Verizon Communications subsidiaries will serve as collateral for a $500 million asset-backed securities (ABS) deal, the Verizon Master Trust Series, 2022-5.
The pool of payment plans includes contracts with original terms 24, 30, and 36 months, according to a pre-sale report from Fitch Ratings. Business device payment plans represent about 9.8% of the collateral pool, initially and can grow to as much as 10.0%, based on contractual concentration limits.
BofASecurities is the lead underwriter on the transaction, for which Cellco Partnership is acting as sponsor, servicer, custodian, marketing agent and administrator, the rating agency said.
The transaction has a cutoff date of June 19, and could also issue another round of notes from the platform, through series 2022-6. The deal will issue notes from a collateral pool of 24.4 million receivables, or contracts, and 13.9 million accounts.
Owing to the pool’s revolving nature, Fitch Ratings assigned a base case default ratio of 3.9%, even though the rating agency’s default assumption for the pool was 3.1% as of the statistical calculation date. Fitch also assigned stress multiples of 4.5x for the consumer and 5.0x for the business portfolios at the ‘AAA’, respectively. Different revolving period lengths account for the different stress multiples, the rating agency said.
Fitch credits Verizon’s securitization program with stable performances despite upticks in delinquencies observed during the height of the coronavirus pandemic, Fitch said. VZMT securitizations had been strong with delinquencies in the 60+ day range staying below 50 basis points (bps), while the cumulative default rate remaining below 1.5% since the program’s inception.
This could be because Verizon payments are high on contract holders’ payment priorities, which helps to contribute to the program’s record of stable performance.
The deal has an aggregate principal balance of $14.8 billion.
On a weighted average (WA) basis, consumers have a tenure of 111 months. The non-zero WA FICO score is 720. Of the pool, about 26.5% of the pool have a FICO score below 650, a threshold that Fitch considers subprime.
Fitch expects to assign ratings of ‘AAA’ on the A1A/B class, which will issue $443.8 million in notes. Fitch expects to assign ratings of ‘AA+’ and ‘AA-’ to classes B and C, respectively.
The notes benefit from credit enhancement of 20.0%, 13.0% and 9.7% on the A1a/B, B and C notes, respectively.
