Morningstar DBRS Assigns Provisional Credit Ratings to Switch ABS Issuer, LLC, Series 2025-1

DBRS Limited (Morningstar DBRS) assigned provisional credit ratings to the following classes of Term Notes, Series 2025-1 to be issued by Switch ABS Issuer, LLC (the Master Trust):

-- Class A-2 at (P) A (low) (sf)
-- Class B at (P) BBB (low) (sf)

All trends are Stable.

Switch ABS Issuer, LLC is a securitization collateralized by the borrower's fee-simple and leasehold interest in eight data center properties (nine buildings) in four states: Georgia, Michigan, Nevada, and Texas. Morningstar DBRS generally takes a positive view on the credit profile of the overall transaction based on the portfolio's favorable property quality, affordable power rates, desirable efficiency metrics, and strong redundancy. Switch, Ltd. (Switch) held a portfolio of more than 20 operating data center properties in six different metropolitan areas, inclusive of the subject collateral. The transaction is structured as a Master Trust with the subject Series 2025-1 notes being the third issuance of notes from the Master Trust. The inaugural Series 2024-1 notes were securitized by four assets located in Michigan, Nevada, and Texas. As part of the second issuance, Series 2024-2, two additional assets located in Georgia and Nevada were contributed to the Master Trust. Additionally, as part of the subject issuance, two additional assets located in Nevada will be contributed to the Master Trust. The debt and collateral associated with the first and second issuance from the Master Trust were considered during the analysis of the subject issuance.

Morningstar DBRS' credit rating on the term notes reflects the low leverage of the transaction, the strong and stable cash flow performance, and a firm legal structure to protect noteholders' interests. The credit rating also reflects the quality of service provided by the company, the access to key fiber nodes, and technology that can maintain the data centers' relevance into the future.

The data centers backing this financing are generally well built and benefit from the large national network provided by Switch. Switch is a leader in the technology sector with more than 700 patents and patents pending for design and operations that maintain its high standards and reliability. Switch also uses a modular design that allows for infrastructure upgrades and interchanging with minimal disruption. Finally, Switch has, over the last two decades, developed a large purchasing co-operative for its customers that allows for savings on both connectivity and power, both of which represent key inputs for users.

Data centers, which have existed in various forms for many years, have become a key component of the modern global technology industry. The advent of cloud computing, streaming media, file storage, and artificial intelligence applications has increased the need for these facilities over the last decade in order to manage, store, and transmit data globally. Both hyperscale and co-location data centers have a role in the existing data ecosystem. Hyperscale data centers are designed for large capacity storage and processing of information, whereas co-location centers act as an on-ramp for users to gain access to the wider network, or for information from the network to be routed back to users. Switch, Ltd. operates a large network using third-party and proprietary fiber to provide access to a large number of technology firms. From the standpoint of the physical plants, the data center assets are adequately powered, with some assets in the portfolio exhibiting higher critical IT loads than others. Morningstar DBRS views the data center collateral as strong assets with a strong critical infrastructure, including power and redundancy that is built to accommodate the technology needs of today and the future.

Morningstar DBRS' credit rating on the term notes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related Principal Amounts and Interest Distribution Amounts for Class A-2 and Class B.

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, Post-ARD Additional Interest for Class A-2 and Class B; Unpaid Accrued Note Interest for Class A-2 and Class B; and Prepayment Consideration for Class A-2 and Class B.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS 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 Morningstar DBRS 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, or Governance factors that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) at https://dbrs.morningstar.com/research/437781.

All credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

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

The principal methodology is Rating and Monitoring Data Center Transactions (November 20, 2024), https://dbrs.morningstar.com/research/443269.

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

With regard to due diligence services, Morningstar DBRS was provided with the Form ABS Due Diligence-15E (Form-15E), which contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While due diligence services outlined in Form-15E do not constitute part of Morningstar DBRS' methodology, Morningstar DBRS used the data file outlined in the independent accountant's report in its analysis to determine the credit ratings referenced herein.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info-DBRS@morningstar.com.

The credit ratings were 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.

Morningstar DBRS 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.

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of final credit ratings on the above-mentioned securities is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

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

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

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

-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283
-- Legal Criteria for U.S. Structured Finance (December 3, 2024), https://dbrs.morningstar.com/research/444064

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.