DBRS Morningstar Assigns Credit Rating of AA (sf) to AT&T Receivables Funding, LLC

DBRS, Inc. (DBRS Morningstar) assigned a credit rating of AA (sf) to the September 28, 2023 Investment (the Investment) and yield created under the Second Receivables Purchase Agreement dated September 28, 2017 (as amended to date, the Purchase Agreement) among AT&T Receivables Funding, LLC as the Seller; New Cingular Wireless PCS, LLC, doing business as AT&T Mobility, as the Servicer; the pool purchaser agents from time to time and the pool purchasers from time to time; and Citibank, N.A. (rated AA (low) with a Stable trend by DBRS Morningstar) as the Agent. The Investment was made in an amortizing pool of receivables originated by AT&T Mobility for obligors to finance the purchase of mobile phones and similar devices, and was sold by the Seller under the Purchase Agreement.

CREDIT RATING RATIONALE/DESCRIPTION
The credit rating is based on DBRS Morningstar’s review of the following analytical considerations:

-- Transaction advance rate, form, and sufficiency of available credit enhancement and the assigned credit rating. The transaction benefits from (1) credit enhancement in the form of overcollateralization, implied excess spread, and a full turbo structure, in which credit enhancement levels are sufficient to support the DBRS Morningstar expected loss under various stress scenarios; and (2) other advantages provided by the structured Investment, including (A) a discrete pool of assets via specified selection criteria and (B) the application of conservative assumptions in the stress analysis.
-- DBRS Morningstar has performed an operational review of the Servicer of the receivables and considers the entity to be an acceptable servicer of handset loans.
-- DBRS Morningstar was provided sufficient performance data from program-originated contracts.
-- The transaction pool contains high-quality collateral.
-- The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary “Baseline Macroeconomic Scenarios for Rated Sovereigns: June 2023 Update,” published on June 30, 2023. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020.
-- The legal structure and presence of legal opinions that address the true sale of the assets to the purchasers; the nonconsolidation of the special-purpose vehicles with AT&T Receivables Funding, LLC; and that the purchasers have a valid first-priority security interest in the assets and are consistent with the DBRS Morningstar “Legal Criteria for U.S. Structured Finance.”

DBRS Morningstar’s credit rating on the obligations referenced herein addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for the rated obligations are certain Yield amounts and the Investment amount.

DBRS Morningstar’s credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations. The associated contractual payment obligation that is not a financial obligation is the increased Yield amount if an early amortization event has occurred.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The DBRS Morningstar short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (July 4, 2023; https://www.dbrsmorningstar.com/research/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings).

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology applicable to the credit rating is Rating U.S. Structured Finance Transactions, including Appendix I: U.S. Consumer Loan ABS Transactions (September 25, 2023; https://www.dbrsmorningstar.com/research/421053).

Other methodologies referenced in this transaction are listed at the end of this press release.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/421227.

The credit rating was not initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS, Inc.
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New York, NY 10005 USA
Tel. +1 212 806-3277

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- Operational Risk Assessment for U.S. ABS Servicers (July 20, 2023; https://www.dbrsmorningstar.com/research/417415).

-- Operational Risk Assessment for U.S. ABS Originators (July 20, 2023; https://www.dbrsmorningstar.com/research/417416).

-- Legal Criteria for U.S. Structured Finance (December 7, 2022; https://www.dbrsmorningstar.com/research/407008).

-- Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023; https://www.dbrsmorningstar.com/research/415687).

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].