Hyundai Auto Receivables Trust is preparing to raise $1.4 billion in auto asset-backed securities, secured by a pool of new loans, primarily.
Used vehicles are also part of the collateral pool, but account for a small percentage, about 5.1%. Otherwise, the pool is largely made up of new cars financed by longer-term loans extended to borrowers with strong credit, according to Fitch Ratings.
FICO scores above 750 account for 55.6%, of the Hyundai Auto Receivables Trust 2022-C pool. Hyundai Capital America originated the 73,607 loans in the pool, and while the company's portfolio delinquencies have been elevated in recent years, they are below peak levels from the 2008 vintage, Fitch said.
Notes in classes A, B and C carry initial hard credit enhancement of 7.80%, 6.00% and 3.00%, respectively. The rating agency says this initial hard credit enhancement can withstand Fitch's base case credit net loss proxy of about 1.60%.
When it comes to excess spread, however, recent interest rate volatility has lowered that metric to levels below the previous deal, 2022-B at pricing.
SMBC Nikko Securities America is the lead underwriter on the deal, while various Hyundai entities are acting as sponsor/seller/servicer, depositor and issuer on the deal.
The loans have a aggregate balance of $1.7 billion, an average principal balance of $23,186 and a weighted average (WA) annual percentage rate of 3.85%, according to Fitch. Also on a WA basis the collateral pool has a loan-to-value ratio of 100.1%, FICO score of 764 and original term of 66.2 months.
When examined by loan term duration, the 2022-C deal has a weaker borrower profile among loans with 61- to 72-month terms compared with the overall transaction, Fitch said. This segment also has a WA FICO score of 748, versus 764 for the aggregate pool. Fitch considers the concentration of extended loan terms a credit negative, because those types of loans typically have higher loss frequency and defaults, while borrowers with lower FICO scores also tend to have higher loss levels.
Still, the notes benefit from overcollateralization and a reserve account, in addition to subordination built into the capital structure and excess spread of about 2.50%.
Fitch intends to assign ratings of 'F1+' to the A-1 class, 'AAA' to the A-2A/B through A-4 classes, 'AA+' to the class B certificates and 'A+' to the class C notes.
