Toyota Motor Credit Corp., a frequent use of asset-backed financing, is returning to issue $800 million in asset-backed securities from a pool of closed-end vehicle leases on new Toyota and Lexus vehicles.
Known as Toyota Lease Owner Trust, 2023-B, the deal is the sponsor's second issuance this year, according to ratings analysts from Moody's Investors Service. On a cumulative basis, Moody's said its net credit loss expectations on the notes is 0.50%, and the total loss for the triple-A level stress for the collateral is 19.00%. The total loss at 'Aaa' stress is 0.50%.
Toyota's reputation as an experienced auto loan originator, servicer and securitizer is considered a credit positive. It had a total managed lease portfolio of about $24 billion, and has issued more than 50 public auto ABS transactions in 30 years. As the pool amortizes, credit enhancement builds up in the pool, Moody's said.
Citigroup Global Markets is the lead underwriter on the deal, which is expected to close on September 19, Moody's said.
In one form of credit enhancement, the notes will repay principal to investors sequentially, beginning with the class A-1 notes. All junior notes will be shut out from receiving any principal payments until the immediate senior notes are paid down. This powers two forms of non-declining credit enhancement—16.25% to the class A notes and a non-declining reserve fund of 0.25% of the pool balance, Moody's said.
A few major credit aspects of TLOT 2023-B are also in line with prior transactions, according to Fitch Ratings. For one, the underlying loans have a weighted average (WA) FICO score of 771, with a plurality of the loans, 45.8%, having scores above 780. Also, it has a hard credit enhancement level of 16.50% for the class A notes.
Legal final maturities range from Sept. 20, 2024 through Dec. 20, 2027.
Most of the notes are expected to be fixed rate, while the A-2-B notes could be benchmarked off of the Secured Overnight Financing Rate (SOFR).
Moody's expects to assign ratings of 'P-1' to the class A-1 notes and 'Aaa' to the A-2 through A-4 notes. Similarly, Fitch assigns top ratings of 'F1+' to the A-1 notes, while assigning 'AAA' to the A-2 through A-4 notes.
