DBRS Morningstar Assigns Ratings on AB Issuer LLC Series 2022-1

DBRS, Inc. (DBRS Morningstar) assigned ratings to the following notes (the Notes), issued by AB Issuer LLC:

-- $200,000,000 Series 2022-1, Class A-1 Variable Funding Notes at BBB (sf)

The ratings on the Class A-1 Notes are based on DBRS Morningstar’s review of the following considerations:

-- The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary “Baseline Macroeconomic Scenarios For Rated Sovereigns: September 2022 Update,” published on September 19, 2022. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020.

-- Authority Brands, Inc.’s (formerly known as Villa BidCo Inc. (Authority Brands or the Company)) scale, diverse brand portfolio, nationwide footprint, and franchise business model, with a 96% franchised system, 1,900-plus units across the brands, and approximately $1.7 billion in system sales annually.

-- The Company’s long track record of consistent financial performance, with systemwide sales and average unit volume steadily growing overall since inception.

-- Favorable demand fundamentals in the home services industry with residential housing stock increasing and driving demand for more outsourcing of home services, an aging U.S. residential infrastructure needing more repair services, and consumer preference shifts to outsourced home services for their time-saving benefit and convenience.

-- The Company’s market positioning with its broad range of brands and breadth of home services offered in what is a highly fragmented industry.

-- DBRS Morningstar’s operational risk review of Authority Brands as the manager.

-- The structural features of the transaction, such as the interest reserve account, the cash sweep mechanism, and the rapid amortization triggers, which help pay down the notional balance of rated notes upon a business deterioration.

-- DBRS Morningstar conducted a breakeven Day 1 revenue haircut analysis to the transaction and assumed revenues do not recover. Breakeven revenue haircuts for the Class A-1 Notes are 50%, consistent with DBRS Morningstar BBB rated whole business securitizations.

-- The consistency of the transaction’s legal structure and legal opinions with the DBRS Morningstar’s “Legal Criteria for U.S. Structured Finance.”

ESG CONSIDERATIONS
There were no Environmental/Social/Governance (ESG) factors 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 at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).

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

The principal methodology is Rating U.S. Structured Finance Transactions, Appendix XV: U.S. Whole Business Securitizations (November 8, 2022), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

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/384482.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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