Honda offers $2.1 billion in auto ABS to investors

A pool of prime, retail auto loan contracts will secure $2.1 billion in asset-backed securities offered to investors through the Honda Auto Receivables 2024-4 Owner Trust.

HAROT 2024-4 will issue the notes through four tranches of class A notes, according to ratings analysts Moody's Ratings and S&P Global Ratings, which assessed the notes. The deal's Securities and Exchange Commission prospectus says the notes have legal final maturity dates of Oct. 15, 2025, March 15, 2027, May 15, 2029 and Dec. 16, 2030 on the A1, A2, A3 and A4 tranches, respectively.

BofA Securities, BNP Paribas, Deutsche Bank Securities and TD Securities are joint bookrunners on the deal, according to the SEC, while ANZ Securities, BNY Capital Markets, ING and MUFG are co-managers, according to the SEC. Asset Securitization Report's deal database also notes that BofA Merrill Lynch, BNP Paribas, Deutsche Bank Securities and TD Securities are managers.

The deal is slated to close this week, with yields expected to range from 4.73% on the class A1 notes, rated P1 and A1+ from Moody's and S&P, respectively, to 4.39% on the A4 notes, which received Aaa and AAA ratings from Moody's and S&P, respectively.

All notes are priced against the three-month I-curve.

The notes' credit quality rests on a handful of compelling strengths. Moody's says American Honda Finance Corp., the deal sponsor, is highly rated (A3/P2 with a stable outlook) and financially strong. Also, the borrowers on the underlying loans have a weighted average (WA) FICO score of 768. Also, the pool has a high concentration of tier A loans, 76.7%, according to Moody's.

The securitized pool has a robust performance history, too, Moody's said, noting that its loss expectations over a lifetime for 2013 through 2023 vintages are very low, ranging from 0.35% through 0.75%.

The current pool, however, has the largest proportion of longer-term loans, at 49.8%. While this is a concern for Moody's analysts, the rest of the industry has seen this kind of increase, the company said.

S&P says that the notes, all of which are fixed, have 66% in hard credit enhancement and excess spread. That level of support provides coverage of more than 5.0x of its expected cumulative net loss of 0.55% for the class A notes.

Aside from the A1 notes, S&P assigns ratings of AAA to the rest of the pool. Aside from the most senior notes, Moody's assigns Aaa to the notes, the rating agency said.