Honda Auto Receivables Owner Trust is preparing to come to market with at least $1.7 billion in asset-backed bonds, secured by a pool of prime-quality retail installment auto loans, through series 2025-2.
The issuance amount could be upsized to $2 billion, with almost no difference in the capital structure, according to Moody's Ratings, which rated the notes along with Fitch Ratings. Contracts on new and used automobile, light truck, and utility vehicles under the Acura and Honda brands.
HAROT, series 2025-2, is expected to issue five rated tranches of class A notes and an unrated tranche of certificates. Yields on the notes are expected to range from 4.44% on the nots rated P1 and F1+ from Mody's and Fitch, respectively, to 4.32% on the Aaa and AAA notes.
Notes, meanwhile, are indexed to the one-month I-curve on most of the notes, except for the A2b tranche, which could be priced to the 30-day Secured Overnight Financing Rate (SOFR)
Like recent HAROT transactions, the underlying loans have a weighted average (WA) FICO score of 769. A vast majority of the loans, 85.9%, are new vehicles, while hybrid vehicles make up 24.80% of the pool.
The collateral pool contains 73,301 loans, with an average current principal balance of $23,566.
Credit enhancements include a reserve account and subordination, among other provisions. Moody's notes that the transaction will repay principal to noteholders sequentially, and because of that, non-declining enhancement will grow as a percentage of the remaining assets as the pool pays down.
The non-declining reserve fund and subordination represent 0.25% and 2.50% of the of the initial pool balance, respectively.
There are a few characteristics that rating agencies say are potential challenges.
Extended term loans, another pool characteristic, account for 49.1% of the pool, in line with the 48.0% seen on the 2025-1 series and the 49.8% on the 2024-4 notes, Fitch said.
J.P.Morgan Securities is lead underwriter on the deal, the rating agencies said.
Regardless of the securitization amount, Moody's assigns P1 to the A1 notes and Aaa to the A through A4 notes. Fitch assigns F1+ to the A1 notes and AAA to the A2 through A4 notes.
