In its fourth transaction of the year, Honda Auto Receivables Owner Trust is preparing to issue at least $1.3 billion in asset-backed securities, secured prime auto loan contracts.
American Honda Finance is sponsoring the deal, series 2023-4, which could be upsized to $1.8 billion in notes before its expected closing date, November 8, according to a Moody's Investors Service pre-sale report. Whatever the securitization trust's outstanding securitization amount, all of the versions will issue notes through four class-A tranche of notes, a 'P-1'-rated class; and three other classes rated 'Aaa' from Moody's, the rating agency said.
All of the notes have total initial hard credit enhancement levels of 2.75%, and a reserve fund of 0.25%, also regardless of the securitization amount.
Citigroup Global Markets is one of several managers on the deal, according to Asset Securitization Report's deal database. The group includes J.P.Morgan Securities, Mizuho Securities, and Societe Generale Corporate and Investment Banking.
Early pricing talk was not available on the notes, at least through the ASR's deal database, but the notes are slated to price over the three-month interpolated yield curve, the same as previous deals. The most recent deal, the HAROT 2023-3, saw pricing range between 46 basis points and 48 bps over the three-month I-Curve on the triple-A rated A2 notes.
The deal's asset pool characteristics, also regardless of issuance amount, include a weighted average (WA) FICO score of 768, and an annual percentage rate (APR) of 4.36%. New vehicles account for 86.1% of the pool, especially for the potentially larger-sized pools, but should $1.3 billion in notes be issued, that percentage would be slightly lower, at 85.9%.
Those characteristics are generally similar to HAROT 2023-2, and generally all other HAROT series going back to 2020-3, Moody's said.
Moody's says it expects a cumulative net loss of 0.35% on the HAROT 2023-4 notes, and the deal has more credit strengths than it does weaknesses. One of those strengths is American Honda Finance's 20 years of securitization experience. Aside from a FICO score of 768 on a WA basis, some 77.2% of the loans in the 2023-4 transaction fall into tier A, while the concentration of tier C loans account for 7.9% of the base pool.
One particular weakness is that longer-term loans—those with original terms greater than 60 months—account for 38.6% of the collateral base pool, represents the highest portion of such loans on the platform, since the 2023-2 series.
Fitch Ratings also plans to assess the notes, and expects to assign ratings of 'F1+' to the A1 notes and 'AAA' to all other rates notes through the deal.
