Huntington National Bank is preparing to sponsor $3 billion in credit-linked notes, secured by payments on auto installment sales contracts, issuing them through the Huntington Bank Auto Credit-Linked Notes, 2024-1.
HACLN 2024-1 is the first auto credit linked notes deal from the bank, according to analysts at Moody's Ratings. The bank, however, has issued auto asset-backed securities (ABS) through the Huntington Auto Trust since at least 2008, and before that raised funds through a collateralized debt obligation (CDO), according to Asset Securitization Report's deal database.
HACLN's debt issuance, which combines elements of bonds and credit default swaps, will offer investors notes through seven tranches of A, B, C, D, E and R classes, according to Moody's. These CLNs are priced with the three-month Secured Overnight Financing Rate (SOFR).
Of the 166,935 contracts, a slight majority of the vehicles (52%) are new, Moody's finds.
Only Huntington National Bank will be responsible for making the interest and principal
payments to the notes, but the interest payments are not based on interest payments collected from the reference pool. Under certain circumstances noteholders could bear the costs of losses realized from credit events. The bank will only make principal payments on the notes based on the scheduled and unscheduled principal payments that have been collected in the reference pool.
J.P.Morgan Securities is the lead underwriter on the deal, where all of the notes have the same legal final maturity date, May 20, 2032, the rating agency said.
Among the deal's credit strengths is the credit quality of the collateral's reference portfolio, Moody's said. The assets have a weighted average (WA) FICO score of 801, including a minimum FICO of 660. Also on a WA basis, they have an original term of 74 months and a loan-to-value ratio of 86.8%. The rating agency sets a credit loss expectation of 0.50% for HACLN 2024-1.
Moody's assigns A3 to the B1 and B2 notes; Ba2 to the class C notes; an B3 to the class D notes.
