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Cleaner, Long-Awaited HART Auto ABS Prices

The Hyundai Auto Receivables Trust finally came to market last week, with key changes that boosted its ratings and lowered initial and target credit enhancement for its class A notes.

The changes garnered the deal strong pricing, even as credit remains tight in the structured finance market, according to people familiar with the deal. Unlike previous HART transactions, which included a senior/subordinate structure, the 2007-A series consists solely of class A notes.

"That is probably a reflection of the current market," a market source said. "They were trying to not be overly aggressive with the [inclusion of] subordinate tranches."

Jointly managed by Barclays Capital and JPMorgan Securities, according to sources familiar with the deal, the $859 million securitization is secured by payments on prime auto loans. The three-to-seven year notes snagged triple-A ratings from Fitch Ratings and Standard & Poor's. The deal also included a short-term class, rated F1+' and A-1+' by the rating agencies. Market sources had been anticipating the deal for several weeks.

Initial and target hard credit enhancement for the class A notes decreased 4% and 12.7%, respectively, from the previous transaction, according to Fitch. The structure also includes the availability of excess spread to turbo pay the notes and to reach the target enhancement of 22.5%, according to Fitch. Overall, losses on the current series are expected to be lower, compared to the 2006-B notes.

Initial credit enhancement on the class A notes equals 9.75%. Another strong feature is the strong credit score of the obligors on the underlying auto loans. At 715, the 2007-A series had the second-highest weighted average credit score among all HART transactions, and it was 14 points higher than the 2006-B deal. Because of an increase in what Fitch Ratings described as the A+' credit tier, obligors with that rating account for 64.9% of the underlying pool of loans, compared with 52.6% for the 2006-B deal. Additionally, the deal has the lowest concentration ever of the worst-performing C' and D' credit tiers.

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