Hyundai Back for Seconds in $1.12B Auto Lease ABS

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Hyundai Capital America is marketing its second securitization of the year of leases on new Hyundai and Kia vehicles. The $1.12 billion transaction is the 12th overall for Hyundai Capital (which has a ‘Baa1’ investment grade rating from Moody’s).

The capital stack includes a $142.5 million, one-year money market tranche rated A-1 by Moody’s;  a split tranche of fixed- and floating-rate senior notes due December 2019 totaling $375 million; a three-year, Class A-3 notes tranche sized at $325 million; and an $85.07 million Class A-4 tranche due 2021. All of the class A notes are triple-A rated by Moody’s.  

The leases are made to 56,419 obligors with good credit metrics (weighted average FICO of 746). The weighted average seasoning on the lease is nine months, with 30 months remaining.

Moody’s reported the transaction is strengthened for investors by its lower-than-average exposure to residual value losses in peer deal comparisons. Hyundai’s discounted base residual value is 56.1% of the percentage of the overall securitization value, compared to levels as high as 65% in peer lease transactions.

However the deal does have a higher lease maturity concentration than in other recent HALST transactions: 78% concentration of these maturities in just five quarters, compared to the range of 63%-81% for its transactions since 2014.  

Moody’s also assigned a slightly higher expected cumulative net loss to this deal (1%) compared to last year’s HALST 2016-B transaction that had a 0.75% CNL forecast. Another concern is that up to 50% of the Class A-2 notes will be floating rate, in which a spike in interest rates might erode excess spread.

JPMorgan, Barclays, HSBC and Mizuho are the lead underwriters.


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