Fitch Affirms AT&T Receivables Funding LLC

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed the long-term ratings and Rating Outlooks assigned to AT&T Receivables Funding LLC as follows:

--September 2015 investment 'Asf'; Outlook Stable;

--December 2015 investment 'Asf'; Outlook Stable;

--March 2016 investment 'Asf'; Outlook Stable;

--June 2016 investment 'Asf'; Outlook Stable;

--September 2016 investment 'Asf'; Outlook Stable.

KEY RATING DRIVERS

Collateral Quality: The AT&T Receivables Funding, LLC trust pool consists of 100% device installment plan agreements that are originated and serviced by AT&T Mobility. The static pools are comprised of agreements with long tenured AT&T customers, and customer tenure is a strong indication of future performance. Fitch only gives credit to installment payments prior to the plans being eligible for upgrade, which, depending on the underlying contract, can be either 50% or 80% of the installment payments.

Fitch assigned a base case default rate of between 3.1% and 3.3% for the pools and applied a stress multiple of 3.6x at the 'Asf' stress level, reflecting the limited program-specific data history and the view that customer payment behavior on the installment contracts could be negatively impacted by an AT&T insolvency.

Rating Cap of 'Asf': Fitch applied a rating cap of 'Asf' due to the limited historical performance data available for the underlying device installment agreements, especially for the longest term contracts, which comprise a majority of the pool. Fitch did receive performance data on the predecessor subsidy program, which served as proxy information, but this data was likewise limited in scope and did not encompass any period of economic stress.

AT&T Rating Dependency: While not directly linked, the rating of the investments face greater exposure than other consumer loan transactions to the credit profile and market position of AT&T (rated 'A-'/'F2'/Rating Watch Negative by Fitch), whose subsidiaries act as originators, servicer and network operator. In Fitch's view, customers may change their payment behavior in the event of an AT&T insolvency.

Servicing Capabilities: New Cingular Wireless PCS, LLC D/B/A AT&T Mobility, as servicer of the pools, has an extensive history of servicing cell phone contracts. Due to this and AT&T's position as one of the largest wireless service providers in the United States, Fitch considers AT&T's servicing operations of cell phone contracts to be a strength compared to its peers.

RATING SENSITIVITIES

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 CE and remaining loss coverage levels available to the investments. Decreased CE may make certain ratings on the investments 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 charge-off assumption by an additional 25% and additional 50%, and examining the rating implications. The increases of the base case chargeoffs are intended to provide an indication of the rating sensitivity of the notes to unexpected deterioration of a transaction's performance.

During the sensitivity analysis, Fitch examines the magnitude of the multiplier compression by projecting the expected cash flows and loss coverage levels over the life of investments under higher than the initial base case chargeoff assumptions. Fitch models cash flows with the revised chargeoff estimates while holding constant all other modelling assumptions.

For the September 2016 pool, a 25% charge-off stress would result in a one notch downgrade. Under the 50% stress, the notes would fall an additional two notches, while still remaining investment grade.

No other outstanding pools would be sensitive to either a 25% or 50% charge-off stress.

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

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)

https://www.fitchratings.com/site/re/886006

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 26 Oct 2016)

https://www.fitchratings.com/site/re/888492

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)

https://www.fitchratings.com/site/re/882401

Global Consumer ABS Rating Criteria (pub. 01 Dec 2016)

https://www.fitchratings.com/site/re/891069

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/site/re/883130

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1016646

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1016646

Endorsement Policy

https://www.fitchratings.com/regulatory

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Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed.

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View source version on businesswire.com: http://www.businesswire.com/news/home/20161216005455/en/

Fitch Ratings
Primary Analyst
Harry Kohl, +1-212-908-0837
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Tracy Wan, +1-212-908-9171
Senior Director
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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