Honda American Finance Corp. is readying its second prime auto loan securitization of the year, according to a presale report published by Moody’s Investors Service.
The Honda Auto Receivables 2014-2 Owner Trust is will issue $1.25 billion of securities, including $256 million money market tranche with a preliminary P-1’ rating and three classes of securities with preliminary AAA’ ratings: $299 million of notes maturing in September 2016, $350 million of notes maturing in March 2018, and $95 million of notes maturing in May 2020. All four classes benefit from subordination of 2.5% and an 0.25% reserve fund.
The trust will also issue $25.8 million of subordinated notes that are not rated by Moody’s.
Bank of America Merrill Lynch, Citigroup, and Morgan Stanley are the underwriters.
The transaction is Honda’s 55th term securitization and second of 2014. It is backed by 57,855 contracts, 85.56% of them on Hondas and 14.44% on Acuras. The pool has a similar weighted average FICO score and similar seasoning to recent transactions, according to the presale report.
The weighted average APR of the 2014-2 pool is 2.20%; this reflects the large number of loans with subvented, or subdisized, interest rates. These incentive programs are generally limited to the higher quality borrowers who might otherwise purchase a vehicle with cash. Moody’s expects the presence of these loans should have a positive impact on overall pool performance.