March 10 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings expects to assign the following ratings and Rating Outlooks to the notes issued by Hyundai Auto Lease Securitization Trust 2014-A:
--Class A-1 asset-backed notes ‘F1+sf’;
--Class A-2 asset-backed notes ‘AAAsf’; Outlook Stable;
--Class A-3 asset-backed notes ‘AAAsf’; Outlook Stable;
--Class A-4 asset-backed notes ‘AAAsf’; Outlook Stable;
--Class B asset-backed notes ‘AAsf’; Outlook Stable.
Stable Collateral Quality: The pool is consistent with that of 2013-B, with a strong weighted average (WA) Fair Isaac Corp. (FICO) score of 748 and seasoning of 11 months. Additionally, securitized residuals as a percent of the securitization value have increased to 70.7%. The pool has shifted to the lower credit tier; however the credit composition (i.e. FICO scores) of those borrowers has improved from prior vintages.
Aggressive Sales and Lease Portfolio Growth: Due to sales and lease origination growth in recent years, there could be a large increase in the supply of used Hyundai and Kia vehicles available for sale at auction in the coming years. Fitch has accounted for this in its residual loss analysis, as growth in used vehicle volume could impact residual values.
Adequate Credit Enhancement Structure: Initial hard credit enhancement (CE) will be 16.95% and 13.50% for class A and B notes, respectively, growing to 18.95% and 15.50% of the initial securitization value (SV). Initial excess spread is expected to be 4.74%.
Stable Loss Performance: Credit and residual losses on HCA’s portfolio continue to decline significantly from the elevated levels seen in 2008 and 2009. This is a result of strong obligor credit quality and a solid wholesale used vehicle market, leading to higher recovery rates and residual realizations.
Evolving Wholesale Market: The U.S. wholesale vehicle market has remained strong in recent years. However, increasing off-lease vehicle supply and pressure from increased production levels could lead to decreased residual realizations during the life of the transaction.
Stable Origination/Underwriting/Servicing: Fitch believes HCA to be a capable originator, underwriter and servicer, as evidenced by its historical managed portfolio delinquency and loss experience, as well as securitization performance.
Unanticipated decreases in the value of returned vehicles and/or increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than the base case. This scenario would likely result in declines of credit enhancement and loss coverage levels available to the notes. As such, Fitch conducts sensitivity analyses by increasing the transaction’s initial base case RV and credit loss assumptions and examining the rating implications on all classes of issued notes. The increases to the base case losses are applied such that they represent moderate (1.5x) and severe (2.5X) stresses, respectively. They are intended to provide an indication of the rating sensitivity of notes to unexpected deterioration of a trust’s performance.
The presale report is available at ‘www.fitchratings.com’ or by clicking on the below link.
Link to Fitch Ratings’ Report: Hyundai Auto Lease Securitization Trust 2014-A (US ABS)