Hyundai Motors America is marketing $604.42 million of notes backed by auto leases, according to Fitch Ratings.

Hyundai Auto Lease Securitization Trust 2016-A will issue five classes of senior notes: a money market tranche with a preliminary ‘F1+’ rating from Fitch and three tranches with preliminary ‘AAA’ ratings maturing in July 2018, July 2010 and December 2019. The senior tranches benefit from credit enhancement of 16.95%. There is also a subordinate tranche maturing in October 202 with a preliminary ‘AA’ rating.

The notes will be backed by a pool of closed-end vehicle leases secured by new vehicles manufactured by Hyundai or Kia Motors and originated through Hyundai Capital America, a unit of Hyundai Motors, which will also act as the servicer.

According to Fitch, the pool is consistent with that of recently issued HALST transactions, with a weighted average FICO score of 742; Hyundai and Kia brand composition of 50.3% and 49.7%, respectively; and cars making up the majority of the pool at 69%.

Both credit losses and residual losses on Hyundai’s lease portfolio have begun to increase from the low levels seen in 2010 and 2011, in part due to rapid origination growth and the resulting increase in vehicles coming off lease. Fitch Expects that prices obtained for vehicles coming off lease will continue to decline, which could negative affect the performance of the notes.

Barclays is the structuring manager.

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