Neighborly, a home repair and services franchise, is returning with its second securitization to date, adding to a pipeline of deals building in the ABS market. Whole business ABS, particularly the non-traditional sector, is expected to hit record issuance in 2022, thanks to growing issuer interest in using securitization as a financing method.
Established in 1981, Neighborly offers services ranging from cleaning and home repairs to landscaping and pest control. The franchise consists of 25 different brands, which is “more than any other [Kroll Bond Rating Agency] rated [whole business ABS] transaction, Kroll analysts said in a pre-sale report.
KBRA assigned a BBB- rating to the Series 2022-1 ‘A-1 LR’ and ‘A-2’ notes. The $414m transaction will be led by joint bookrunners Barclays, Mizuho and KKR.
Neighborly has grown in size since issuing its last transaction in March 2021, in terms of location and brands in operation as well as system wide sales. Notably, system-wide sales grew from $2.2bn to $3bn and the franchise opened up 265 more locations.
The diversification and size increase both serve as credit strengths to the deal, Kroll said, though risks linger around potential brand value volatility that comes from having so many brands associated with Neighborly.
The franchise ABS market will see deal sizes grow bigger this year, sources said, due to issuers seeking out securitization as a means of financing, especially with interest rates where they are and the relative value ABS offers compared to corporates.
“Franchise is getting really big. If a company hasn’t done one yet, they will soon,” said a securitization analyst based in New York. “ABS is very attractive for whole business ABS type issuers, so we can expect to see a lot of refi issuance from existing guys as well as new deals.”
