The Huntington National Bank is preparing to sponsor a $3.5 billion securitization of revenue from a pool of fixed auto rate installment sales contracts extended to prime quality borrowers.
Huntington Bank Auto Credit-Linked Notes, 2025-2, or HACLN 2025-2, will sell the notes through seven tranches, according to Moody's Ratings. Classes B through D have a legal final maturity of Sept. 20, 2033, benchmarked on the Secured Overnight Finance Rate (SOFR), the rating agency said.
Bank of America Merrill Lynch, Citigroup Global Markets, J.P. Morgan Securities are the deal's lead underwriters, according to the rating agency.
HACLN 2025-2's collateral pool is composed of 105,275 contracts, and on a weighted average (WA) basis, they have an annual percentage rate (APR) of 8.13%. The obligors have a FICO score of 774, on a weighted average basis, Moody's said. Used vehicles account for 68% of the collateral pool, the rating agency said.
One of the characteristics that boosts HACLN 2025-2's credit strength is that Huntington has been in consumer auto finance since 1950s. Also, it generally uses securitization and credit-linked notes as a risk-management tool to its overall consumer loan exposure.
There are several payment characteristics that also shore up HACLN 2025-2's credit. The deal will repay investors through a pro-rata payment structure. Also, principal will only be paid out to Huntington's noteholders when each tranche of notes maintains a certain level of credit enhancement, Moody's said.
Yet the deal's pro rata structure also specifies that classes B through R will receive a pro-rata share of the payments allocated to the subordinate notes.
"This could leave more senior bonds with a higher exposure to tail risk, when the transaction may not have sufficient subordination," according to Moody's.
The deal subjects the subordinate notes to performance tests, Moody's said. If realized losses build to the point where a cumulative net loss trigger is breached, then the deal will repay subordinate notes sequentially, based on realized losses on the reference portfolio.
Moody's assigned A3 to the B1 notes; A3 to B2 notes; Ba3 to the class C notes; and B3 to the class D notes.
