Oncourse Home Solutions Closes $1.66B Securitization Deal
Oncourse Home Solutions, a provider of home warranty agreements, has completed a first-of-its-kind whole business securitization valued at $1.66 billion. The transaction involves bundling the company's future revenues from its service contracts into securities sold to investors. This complex financial deal provides significant capital for the Naperville-based company.
- The deal is the first-ever securitization of home infrastructure warranty agreements, establishing a new asset class for investors and providing Oncourse with access to investment-grade debt, which is often the lowest cost of capital for companies in sponsor-backed finance. - Proceeds from the securitization will be used to repay existing company debt, pay transaction fees, and fund general corporate purposes, which includes providing capital for strategic mergers and acquisitions. This aligns with the growth strategy under its private equity owner, Apax Partners, which has included acquiring the Appliance Service Plan business from Consumers Energy. - The securities are backed by the predictable, long-term cash flows from Oncourse's 2.3 million service contracts with 1.9 million customers. For investors and rating agencies, financial modeling of these future revenues would involve predictive analytics to forecast key subscription metrics like customer lifetime value (CLV), churn (or attrition) rates, and monthly recurring revenue (MRR). - The transaction was structured as a master trust, which gives Oncourse the flexibility for future debt issuances off the same platform to support ongoing growth. The deal included $1.33 billion in funded term notes and $325 million in revolving notes. - The deal was structured by Jefferies, with Jefferies, MUFG, Mizuho, Goldman Sachs, and Santander acting as bookrunners. Guggenheim Securities, a leader in the whole business securitization market, served as the structuring agent, a role they have played in numerous innovative securitizations across various industries. - The five-year senior notes of the securitization received investment-grade credit ratings of 'Baa2' from Moody's and 'BBB-' from KBRA. These notes were priced at a spread of 250 basis points (2.5%) over the corresponding benchmark interest rate curve. - Oncourse Home Solutions was formed in 2022 after private equity firm Apax Partners acquired the Homeowner Services Group from American Water in December 2021. This carve-out set the stage for a new strategic direction focused on growth and establishing a core identity in the home warranty market.
