American Honda Finance Corp. (AHFC) is in the market with an auto loan securitization called Honda Auto Receivables 2010-3 Owner Trust (HAROT 2010-3). The deal is managed by BNP Paribas and JPMorgan Securities.
According to a Fitch Ratings presale report, this $1 billion offering is the third deal issued by AHFC in 2010. The 2010-3 securities are backed by retail installment sales contracts secured by new and used Honda and Acura automobiles as well as light-duty trucks that AHFC originated and underwrote, the rating agency said.
The five-tranche offering's class A notes will be publicly offered as fixed-rate notes while the class A-1 notes are money market eligible. The non-interest-bearing certificates, which are not rated by Fitch, will not be publicly offered and will be retained by AHFC. The deal's proceeds will be used for general funding purposes.
AHFC is the sponsor and servicer of 2010-3 and is the captive finance subsidiary of American Honda Motor Co. (AHMC), which is in turn a wholly owned subsidiary of Honda Motor Co. Honda is rated ‘F1'/'A’ by Fitch and has a Stable Rating Outlook.
In the sequential-pay deal, the class A notes' initial hard credit enhancement is 2.75% — a 2.50% subordination and a 0.25% reserve. This reflects a 0.50% subordination dip compared with the 2010-2 securitization and a 1.25% subordination drop from the 2010-1 offering, which was not rated by Fitch. Excess spread rose to 3.20% in 2010-3 from 3.10% in 2010-2 and 2.75% in 2010-1, Fitch said.
The 2010-3 deal has a consistent concentration of loans with terms of 61 months or longer, when compared to recent pools, or totaling 10.94%, the rating agency reported.
Longer-term loans usually have higher loss severity, Fitch said, as the loan amortization trails vehicle depreciation. This, in turn, exposes the deal to higher loss severity when an obligor default happens.
The pool is geographically diverse, with California having the biggest concentration at 15.67%, Fitch said.
Consistent with the previous two HAROT deals, the Honda Accord is the biggest vehicle concentration in the 2010-3 pool at 26.12%, much lower than 32.9% in 2010-2 and 31.9% in 2010-1 (NR).
The top vehicle concentration within HAROT securitizations has been as high as 51.5% in the 2003-5 deal, Fitch said, and reached 42.4% as recently as the 2005-3 transaction. The Accord, according to the Fitch presale, was the best-selling car in America in 1Q10 and is recognized for its reliability and strong value retention and recovery rates.
AHFC’s securitizations and serviced portfolio have all had improved loss performance based on the wholesale vehicle market's current strength. But, according to Fitch, risks remain as automakers start to factor in expectations of a recovering domestic market into sales forecasts and ramp up production levels accordingly.
Going back to the hypercompetitive auto markets from earlier in this decade could remove the recent gains in the wholesale vehicle market as well as harm auto loan ABS recovery values and loss performance, Fitch said.
Ford Motor Credit Co. is also in the market with a $867.5 million auto lease ABS. The five-tranche deal is managed by Barclays Capital, Citigroup Global Markets and JPMorgan.
For further information on the Honda and Ford deal, please click the link below from the ASR Scorecard database.
In other auto ABS news, Avis Budget Car Rental is reportedly also marketing another auto ABS that is worth $600 million. DBRS just announced this afternoon that it had assigned provisional ratings to notes issued by Avis Budget Rental Car Funding (AESOP), Series 2010-4 and -5.
The education sector is also seeing some action with the North Texas Higher Education Authorty Inc. 2010-2 deal.
The FFELP-backed transaction is worth $127.6 million. Preliminary details on the transaction are also available via the link below.
Meanwhile, Fitch said that it expects to rate Illinois Student Assistance Commission 2010 Indenture student loan ABS notes series 2010-1. The rating agency intends to rate the deal's $525 million class-A, floating-rate notes 'AAA'/'LS1' with a Stable Outlook.
