Toyota Motor Credit Corp. is returning to the securitization market to raise $1.1 billion in asset-backed securities (ABS) through the Toyota Lease Owner Trust, series 2025-B, the sponsor's second auto lease deal for 2025.
Earlier this year the sponsor brought the TALNT 2025-1 transaction, which sold more than $1 billion through a structure with a five-year revolving period, according to Moody's Ratings.
The newest deal, TLOT 2025-B, will repay principal sequentially, and as a result non-declining credit enhancement will grow as a percentage of the pool's remaining assets as the pool amortizes. That will provide additional enhancement to all the notes, the rating agency said.
TLOT 2025-B will issue the notes through five tranches of class A notes. Legal final maturities range from Sept. 21, 2026 on the A1 notes to Jan. 22, 2030 on the A4 notes. BNP Paribas is managing the deal, along with Mitsubishi UFJ Securities, Scotia Capital and US Bancorp, according to Asset Securitization Report's deal database.
Aside from the increasing credit enhancement, TLOT 2025-B has a couple of other credit strengths, including Toyota's experience as a sponsor and servicer, and the underlying loans' strong credit quality, Moody's said.
Almost all the tranches of notes will pay fixed interest rates, according to Moody's. But that sets up a potential credit risk to the notes. The class A-2B, however, will pay a floating rate benchmarked to the Secured Overnight Financing Rate (SOFR). The pool has 32,703 contracts, on all new vehicles, and underlying assets pay fixed interest rates.
A spike could erode available excess spread in a stressed interest rate environment, according to Moody's.
On a weighted average (WA) basis, the underlying assets have a FICO score of 774, with an original term of 38 months.
Moody's assigns P1 to the A1 notes and Aaa to the A2 through A4 notes. The deal database notes that Fitch Ratings assigns ratings of F1+ to the A1 notes and AAA to the A2 through A4 tranches.
