Toyota Motor Credit's latest securitization of prime retail auto loan contracts, selling $1.5 billion in bonds, will issue a much higher percentage of floating-rate A2B notes than recent deals, and the highest since 2024's first transaction.
Toyota Auto Receivables 2025-A Owner Trust will sell notes through six tranches of class A and B notes, according to Moody's Ratings. A2B notes will make up 75% of total class A2 notes and be benchmarked to the Secured Overnight Financing Rate (SOFR), according to Moody's.
The total issuance can be upsized to $1.9 billion, and legal final maturity dates vary from Jan. 15, 2026 on the A1 notes through Sept. 15, 2031 on the class B notes. Most of the notes, classes A1 through A4, benefit from total initial hard credit enhancement of 2.75% of the pool balance, Moody's said. The class B notes have 0.25% in total initial credit enhancement, the rating agency said.
A 0.25% reserve fund is also part of the deal's credit enhancements, as is subordination, overcollateralization and excess spread. Among the deal's strengths, the collateral has a high weighted average (WA) FICO score of 769 for both base and upsized pools. They also had a weighted average original term of 66 months for both pools.
TD Securities, Citigroup Global Markets, Lloyds Securities, Scotia Capital and SG Americas Securities are the deal's lead underwriters.
On a cumulative basis, Moody's expects a net loss of 0.60% for the original TAOT 2025-A pool and the upsized $1.9 billion pool. Other characteristics of the deal remained the same regardless of the pool size, such as initial credit enhancement levels and maturity dates.
The class A2B notes, being pegged to floating-rate notes and getting revenue from fixed-rate assets, pose a potential credit liability, because spike in interest rates could erode the deal's excess spread.
Also, recent originations starting with Q1 2022, have performed a little worse than previous deals. CNL was higher compared with earlier vintages, Moody's said.
Moody's assigns P1 to the A1 notes; and Aaa to the A2 through A4 notes.
