Auto ABS

The deal is the second one for this year, a different tack for a program that has appeared once annually in the past.

Two issuances will fund revolving pools of leases from various vehicle companies even as a looming recession may dampen travel demand.

The coming Fitch-rated deal has higher FICO scores than competitors' pools, but the auto sector faces headwinds.

HAROT 2023-2 offers notes backed by prime auto receivables, and a slightly higher concentration of credit grade-A obligors, 77.64%, up from 76.45% in HAROT 2023-1.

Of the leases securing the deal, 99.15% are open-end, while the remaining 0.85% are closed-end. This creates a potential positive because loss assumptions on the former are lower.

Prime loans comprise the collateral pool, and the deal has a more diverse loan maturity profile than previous deals.

SDART 2023-2 will build overcollateralization (OC) as it amortizes, initially 23.75%, which is expected to build to a target OC level of 32.50%.

The transaction benefits from several forms of credit enhancement, including overcollateralization, excess spread and Vervent acting as backup servicer.

A vast majority of the collateral, a combined 82.73%, have terms of between 49-60 months (58.46%) and 61-72 months (24.27%), while a slight majority of the pool (51.66%) have no credit scores.

Losses are increasing in both the managed portfolio and the securitization, the deal, known as EART 2023-2, has a number of forms of credit enhancements built into the structure.