American Honda Finance plans either a $1.3 billion or an upsized $1.58 billion securitization of prime auto loan originations for primarily new Honda- and Acura-branded vehicles sold through U.S. franchised dealerships.
The Honda Automobile Receivables 2021-2 Owner Trust transaction will involve four classes of senior notes: three triple-A rated term notes (as assigned by S&P Global Ratings and Moody’s Investors Service) totaling $450 million (or $513 million if upsized) for two-year Class A-2 and a three year- A-3 tranches; $122 million or $138.9 million of Class A-4 notes due August 2024; and a one-year Class A-1 money-market tranche totaling $293.8 million or $335 million, depending on whether the larger or smaller pool of loans is ultimately issued.
The Class A-1 notes carry S&P’s top short-term rating of A-1+, while Moody’s has assigned its provisional P-1 rating.
All of the notes benefit from 2.75% credit enhancement.
American Honda Finance, the captive-finance arm for the U.S. arm of the Japanese automaker, will keep a minimum 5% of the initial principal amount of each tranche of notes for risk-retention purposes.
The proposed collateral pools are similar in credit and loan-term metrics. The average loan balances within the $1.31 billion pool are $18,247 (on 73,958 loans), with a weighted average APR of 2.45%, WA original terms of 61.61 months with 12.16 months of seasoning and a WA FICO of 771.
Extended-term loans (which traditionally have higher levels of defaults and delinquencies in auto ABS pools) over 61 months increased slightly to 29.13% of the pool, compared to 28.92% in Honda’s first loan securitization of 2021. The percentage of new-car financings dipped slightly to 90.36% from 91.74%.
The transaction is the second for American Honda Finance this year, and the 82ndoverall securitization it has sponsored since the early 1990s.
Moody’s has cumulative net loss expectations of 0.35% on the deal, while S&P projects a net loss range between 0.65%-0.75%. (The lender’s net losses on its $31.72 billion portfolio and year-end 2020 was 0.31%).
Citigroup is the lead underwriter.
