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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