Fitch Ratings expects to assign ratings and Rating Outlooks to the series 2021-2 notes issued by Verizon Master Trust (VZMT).

The series 2021-2 notes represent the second issuance from the Verizon Master Trust.

RATING ACTIONSENTITY/DEBT	RATING

Verizon Master Trust Series 2021-2

A

LT	AAA(EXP)sf 	Expected Rating

B

LT	AA(EXP)sf 	Expected Rating

C

LT	A(EXP)sf 	Expected Rating

VIEW ADDITIONAL RATING DETAILS

KEY RATING DRIVERS

Solid Receivable Quality: The VZMT pool primarily consists of DPPs with 24-month (45.5%) and 30-month (54.5%) original terms that are originated and serviced by subsidiaries of Verizon Communications Inc. The pool also features business DPP receivables at 9.8%, which can grow to a maximum of 10.0% of the pool based on the contractual concentration limits. The weighted average tenure customers have been with Verizon is 100 months. Furthermore, the weighted average FICO score is 705. Of the pool, about 31.9% has a FICO score below 650 (or no FICO score available), which Fitch would consider subprime.

Base Case Loss Proxy Reflects Revolving Period: While Fitch's default assumption for the pool as of the statistical calculation date is 3.6%, a base case default rate of 4.21% was assigned to the worst-case portfolio to account for the revolving period. Fitch applied a stress multiple of 5.5x and 6.0x at the 'AAAsf' stress level, for the consumer and business portfolios, respectively. The stress multiples reflect the view that customer and business payment behavior on the DPPs could be negatively affected by a Verizon insolvency as well as the potential for performance degradation during the revolving period.

Stable Historical Performance: To date, default performance of Verizon's prior securitizations and overall managed portfolio has been stable, despite upticks in delinquencies seen during the global coronavirus pandemic. Fitch believes DPP receivables are high on an obligor's payment priority, which contributes to this stable performance.

Verizon Rating Dependency: While not directly linked, the ratings of the notes face greater exposure than other consumer loan transactions to the credit profile and market position of Verizon Communications Inc. (A-/F1/Stable) whose subsidiaries act as originators, the servicer, and network operator. In Fitch's view, this can take the form of indirect exposure through customers changing their payment behavior in the event of Verizon insolvency and directly through the risk of device payment upgrade contract remittances not being made to the trust following Verizon's insolvency.

Fitch applies a 0.35% upgrade uplift to the default assumption at each rating category above Verizon's rating to account for the risk of upgrade remittances not being made to the trust. For these reasons, a downgrade of Verizon Communications Inc. could affect Fitch's credit ratings of the notes. While a limited downgrade of Verizon is unlikely to result in a downgrade of the senior notes, a multiple-notch downgrade, particularly to speculative grade, will increase the likelihood of a downgrade of the senior notes below 'AAAsf'.

Strong Servicing Capabilities: Cellco Partnership, as servicer of all Verizon Owner Trust (VZOT) pool receivables, has a long track record of servicing consumer cell phone contracts. Due to this factor and Verizon's position as the largest wireless service provider in the U.S., Fitch considers Verizon's servicing operations of cell phone contracts adequate and a strength compared to its peers.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Unanticipated increases in the frequency of defaults or chargeoffs on customer accounts could produce loss levels higher than the base case and would likely result in declines of credit enhancement (CE) and remaining loss coverage levels available to the notes. Decreased CE may make certain ratings on the notes susceptible to potential negative rating actions, depending on the extent of the decline in coverage.

Fitch conducts sensitivity analysis by stressing a transaction's initial base case default assumption an additional 10%, 25%, 50%, and 100% and examining rating implications. These increases of the base case are intended to provide an indication of the rating sensitivity of the notes to unexpected deterioration of a trust's performance.

Rating sensitivity to increased defaults (class A/class B/class C):

Current Ratings: 'AAAsf'/'AAsf'/'Asf'

Increased default base case by 10%: 'AA+sf'/'AA-sf'/'A-sf';

Increased default base case by 25%: 'AAsf'/'A+sf'/'BBB+sf';

Increased default base case by 50%: 'A+sf'/'A-sf'/'BBB-sf';

Increased default base case by 100%: 'BBB-sf'/'BBB-sf'/'BBsf'.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Stable to improved asset performance driven by stable delinquencies would lead to increasing CE levels and consideration for potential upgrades. If defaults are 20% less than the projected base case default rate, the expected ratings for the class B notes could be upgraded by one rating category and the class C notes by up to two notches.

Rating sensitivity from decreased defaults (class A/class B/class C):

Current Ratings: 'AAAsf'/'AAsf'/'Asf'

Decreased default base case by 20%: 'AAAsf'/'AAAsf'/'AA-sf'

Best/Worst Case Rating Scenario

International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10

Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as prepared by Ernst & Young LLP in conjunction with the VZMT 2021-1 issuance. The third-party due diligence described in Form 15E focused on a comparison and recalculation of certain characteristics with respect to 4,000 randomly selected statistical receivables. Fitch considered this information in its analysis, and the findings did not have an impact on our analysis.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS

A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by clicking the link to the Appendix. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions'.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.

Additional information is available on www.fitchratings.com

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