Hyundai Capital is marketing its third auto lease securitization of the year, according to Fitch Ratings.
The deal, called Hyundai Auto Lease Securitization Trust 2016-C, will issue five tranches of notes totaling $785.38 million.
Fitch expects to assign an ‘AAA’ rating to three tranches of class A notes with 16.95% credit enhancement and an ‘AA’ to a single tranche of class B notes that have 13.50% credit enhancement.
The credit enhancement is lower than on comparable tranches of a lease securitization that Hyundai completed in May; the senior tranche of that deal had 23% credit enhancement. However, Fitch said that the loss coverage provided by the lower level is adequate to support its ‘AAA’ and ‘AA’ stressed assumptions.
The notes will be backed by a pool of close-end vehicle leases, secured by new vehicles made by Hyundai Motor and KIA Motors. The originator and servicers is Hyundai Capital.
In its presale report, Fitch notes that losses Hyundai Capital books when it disposes of off-lease vehicles continues to increase from the low levels seen in 2010 and 2011. The rating agency attributes this to rapid growth in leasing over the past few years, which results in more vehicles coming off- lease, depressing prices.
However, Hyundai and KIA both exhibit strong market presence, brand image, and growth. The lessee credit quality in this latest transaction is also stable; the weighted average FICO score of the transaction is approximately 742. This is consistent with prior transactions.
