Fitch Ratings has assigned ratings and Rating Outlooks to the series 2022-5 and series 2022-6 notes issued by
The series 2022-5 and 2022-6 notes represent the seventh and eighth public issuances, respectively, from the
RATING ACTIONS
Entity / Debt
Rating
Prior
Verizon Master Trust Series 2022-5
A-1a
LT
AAAsf
New Rating
A-1b
LT
AAAsf
New Rating
B
LT
AA+sf
New Rating
AA+(EXP)sf
C
LT
AA-sf
New Rating
AA-(EXP)sf
Verizon Master Trust Series 2022-6
A
LT
AAAsf
New Rating
B
LT
AA+sf
New Rating
AA+(EXP)sf
C
LT
A+sf
New Rating
A+(EXP)sf
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VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
Solid Receivable Quality: The VZMT pool is revolving and primarily consists of DPPs with 24-month (22.0%), 30-month (37.0%) and 36-month (41.1%) original terms that are originated and serviced by subsidiaries of
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 (WA) tenure for customers that have been with Verizon is 111 months. Furthermore, the non-zero
The difference in stress multiples between the series is primarily due to the difference in the length of the revolving periods. The multiples also 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 periods.
Stable Historical Performance: To date, the default performance of Verizon's prior securitizations and overall managed portfolio has been stable despite upticks in delinquencies observed during the height of the coronavirus pandemic. The performance of VZMT has been strong, with 60+ days delinquencies staying below 50 basis points (bps) and the cumulative default rate remaining below 1.50%, since inception. 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 note ratings face greater exposure compared to other consumer loan transactions to the credit profile and market position of
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
Strong Servicing Capabilities:
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Unanticipated increases in the frequency of defaults or charge-offs 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.
Series 2022-5:
Rating sensitivity to increased defaults (class A/class B/class C):
Current Ratings: 'AAAsf'/'AA+sf'/'AA-sf'
Increased default base case by 10%: 'AAAsf'/'AA+sf'/'AA-sf';
Increased default base case by 25%: 'AAAsf'/'AAsf'/'A+sf';
Increased default base case by 50%: 'AA+sf'/'A+sf'/'A-sf';
Increased default base case by 100%: 'A+sf'/'BBB+sf'/'BBB-sf'.
Series 2022-6:
Rating sensitivity to increased defaults (class A/class B/class C):
Current Ratings: 'AAAsf'/'AA+sf'/'A+sf';
Increased default base case by 10%: 'AAAsf'/'AA+sf'/'A+sf';
Increased default base case by 25%: 'AAAsf'/'AA-sf'/'Asf';
Increased default base case by 50%: 'AA+sf'/'Asf'/'BBB+sf';
Increased default base case by 100%: 'Asf'/'BBBsf'/'BBB-sf'.
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.
Series 2022-5:
Rating sensitivity from decreased defaults (class A/class B/class C):
Current Ratings: 'AAAsf'/'AA+sf'/'AA-sf';
Decreased default base case by 20%: 'AAAsf'/'AAAsf'/'AAAsf'.
Series 2022-6:
Rating sensitivity from decreased defaults (class A/class B/class C):
Current Ratings: 'AAAsf'/'AA+sf'/'A+sf';
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
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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