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Nissan, Hyundai add $2B-plus to bustling prime auto ABS pipeline

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Nissan Motor Acceptance Corp. and Hyundai Capital America are pouring $2 billion to $2.3 billion in new auto loan- and lease-backed securitizations into a heated asset-backed market for prime receivables.

Nissan’s deal is backed by auto loans and will be sized at $1 billion or $1.3 billion, depending on demand. Hyundai Capital’s $1 billion transaction is backed by leases ranging from 24 to 48 months on new Hyundai and Kia vehicles.

Hyundai’s is the fourth auto lease deal this year, including General Motors ($1.25 billion), Daimler AG ($1.29 billion) and a debut issue from the new Tesla Inc. platform pooling $546 million in leases from the electric-car manufacturer’s luxury car models.

More than $9.2 billion of prime auto-loan securitizations priced in January from seven issuers, including GM, Toyota, BMW AG, Carmax, Ford and Ally Financial. Nissan’s deal will join the newly launched American Honda Finance loan ABS this month to push the year-to-date issuance past $11.6 billion.

By comparison, there was $9.8 billion of auto-related ABS issued in the entire first quarter of 2017.

Nissan Automobile Receivables 2018-A Owner Trust

Growing loss levels in Nissan Motor Acceptance Corp.’s (NMAC) recent prime auto-loan securitizations are catching up with the captive-finance lender.

Moody’s Investors Service has elevated the net-loss expectations for Nissan Automobile Receivables 2018-A Owner Trust by 15 basis points to 1%, compared to its most recent NAROT 2017-C transaction just two months ago. In its presale report, the rating agency cited the “worse” performance of NAROT 2016 and 2017 transactions, which are experiencing higher-than-expected losses compared with 2013-15-vintage deals. The rating agency is also concerned about growing credit risks in the collateral.
Nissan’s latest pool, for example, has a higher proportion of loans with terms 61 months or longer, 67%, compared with 64% for the previous transaction. The loans in the latest pool are also slightly less seasoned, at 11 months. But the weighted average FICO of the pool is slightly higher at 776, and there is a lower proportion of borrowers with non-prime FICO scores.

S&P estimates losses at a range of 0.9%-1.0%.

If sized at $1.3 billion, the trust will issue a $250 million money-market tranche (with a P-1 rating from Moody’s and A-1 from S&P) and three term tranches of note with preliminary triple-A ratings: $462.5 million of Class A-2 notes due 2020, split between fixed- and floating rate bonds; a $375 million of Class A-3 notes due 2022; and a six-year Class A-4 tranche totaling $162.5 million. All of the senior notes are supported by 4.25% credit enhancement, including 4% overcollateralization and a 0.25% reserve fund.

Compared to average peer transactions from Toyota, Honda, Hyundai, Ford and Ally, Nissan has the highest average FICOs (versus a range of 734 to 761) and an average APR of 2.47%, of which only Toyota (2.15%) and Honda (2.11%) are lower.

Over 94% of the vehicles in the pool are new Nissan autos, light-duty trucks, SUVs and crossovers.

Hyundai Auto Lease Securitization Trust 2018-A

Hyundai Capital America is marketing a six-class note offering of more than $1 billion bonds backed by auto-lease receivables, the 15th such securitization by HCA.

A $137.2 million money-market tranche carries a preliminary P-1 rating from Moody’s. There are also three tranches of term notes with preliminary Aaa ratings: a A-2 tranche due August 2020 totaling $343 million and divided into fixed- and floating-rate notes; a $293 million, three-year A-3 tranche; and an $84.5 million A-4 tranche due 2022.

Irvine, Calif.-based Hyundai Capital (rated Baa1 by Moody’s) is also offering $46.5 million of Class B five-year notes rated Aa1.

The notes are backed by 57,131 retail closed-end leases for new Hyundai and Kia-branded cars. SUVs and crossover vehicles with 24- to 48-month contracts (weighted average original terms of 39 months) originated mostly within the last nine months.

Moody’s expects losses to reach 1% over the life of the deal, unchanged from its expectations for Hyundai’s previous deal, but a higher level than most other active auto-lease ABS deals. Expected net losses by S&P are unchanged from recent transactions at 1.15%.

The weighted average FICO of the portfolio’s borrowers is 746.

The total securitized value of the leases is $1.03 billion, with Moody’s applying a low base residual value - the expected resale value of the car after its lease term - of 42.8%, based on the MSRP of the vehicles. Although the base RV is lower than other peer lease securitizations, that level limits exposure to potential RV losses from the decline in vehicle values, Moody’s stated.

Hyundai Capital’s managed lease portfolio totaled $17.4 billion outstanding among 856,000 leases as of Dec. 31. Total delinquencies are 1.51%, unchanged from 2016 but up from 1.22% in 2013.

Net credit losses have also climbed steadily each year, totaling 0.61% last year versus 0.27% in 2013.

The total losses on vehicles returned by customers and sold by HCA (33% of all vehicles leased) was down to 6.76% last year.

Underwriters on the deal are Societe Generale, Citigroup, MUFG and RBC Capital Markets.

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Prime auto ABS Auto leasing Moody's