Honda ABS seeks $1.42 billion backed by prime auto loans

Honda Auto Receivables 2023-3 Owner Trust (HAROT 2023-3) is issuing an ABS backed by new and used Honda and Acura automobile, light-truck and utility vehicle loans. The securitization pool has upsize potential of $1.84 billion.

American Honda Finance Corporation (AHFC), the wholly owned captive finance arm of American Honda Motor, originated and serviced the loans.

According to Fitch Ratings, the collateral pool for HAROT 2023-3 is made up of strong credit quality loans. It consists of 85.70% new vehicles, down from 88.86% for HAROT 2023-2, which raised $1.6 billion in May 2023. 

The receivables balance is $1.46 billion, compared to $1.89 billion in HAROT 2023-2, while the number of loans is 65,532, down from 69,210 in HAROT 2023-2.  

On a weighted average (WA) basis, HAROT 2023-3 has a FICO score of 769, slightly lower than for recent HAROT transactions, which have averaged 771 since 2017, Fitch says. Extended-term loans (61+ months) total 39.2% and subvented loans represent 73.0% of the pool; these percentages are generally in line with recent HAROT transactions, Fitch says.

BofA Securities is the lead underwriter, and Citibank holds the series bank account.

Based on historical data, AHFC demonstrates adequate capabilities as originator, underwriter and servicer, Fitch says. However, it points to recent slightly weakening trends, including slowly rising delinquencies and losses, consistent with the broader market.

The cash flow distribution for HAROT 2023-3 is a sequential-pay structure that will increase credit enhancement for the senior notes as the pool amortizes, S&P Global Ratings says. It contains a money market tranche that will receive principal payments senior in the waterfall.

The issue has approximately 7.4% in credit support from hard credit enhancement and excess spread for all of the class A notes, S&P says. Fitch puts the initial hard credit enhancement (CE) at 2.75%, consisting of subordination of 2.50% and a 0.25% reserve, consistent with the prior four transactions issued and pre-pandemic transactions. Fitch considers this to be sufficient credit enhancement. Additionally, a yield supplement account (YSA) increases the effective WA APR and excess spread.

The concentration of hybrid vehicles, at 6.97% of the pool, did not have an impact on its ratings or its ESG relevance score, Fitch said.

S&P has assigned preliminary ratings of 'A-1+' to the class A-1 notes and 'AAA' to classes A-2, A-3, and A-4. 

Fitch has provisionally assigned 'F1+' to class A-1 and 'AAA' to classes A-2, A-3, and A-4.