Feb 18 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings expects to assign the following ratings to the Honda Auto Receivables 2014-1 Owner Trust notes:
—$277,000,000 class A-1 ‘F1+sf’;
—$303,000,000 class A-2 ‘AAAsf’; Outlook Stable;
—$330,000,000 class A-3 ‘AAAsf’; Outlook Stable;
—$90,000,000 class A-4 ‘AAAsf’; Outlook Stable.
Strong Credit Quality: The credit quality of 2014-1, as measured by the weighted average (WA) Fair Isaac Corp. (FICO) score of 754 and internal credit score tiering, is consistent with prior 2012 - 2013 pools. 2014-1 has a large percentage of subvented collateral; new vehicles total 88.8% and seasoning is 12.9 months, in line with prior transactions.
Consistent Credit Enhancement: The cash flow distribution is a sequential-pay structure. Initial hard credit enhancement (CE) is 2.75% (2.50% subordination and a 0.25% reserve), unchanged from 2013-4. A yield supplement account (YSA) boosts the effective WA APR, in turn resulting in excess spread (XS) of 2.37% in 2014-1.
Strong Portfolio/Securitization Performance: Losses on AHFC’s portfolio and 2010 - 2013 securitizations have stabilized and remain at historically low levels, due to stronger quality originations, and stable used vehicle values which have supported higher recovery rates.
Stable Corporate Health: Fitch rates AHFC ‘F1’ and its parent Honda ‘F1/A’ with a Stable Rating Outlook. AHFC has recorded positive corporate financial results in recent years, while the overall health of Honda has remained strong. Consistent Origination/Underwriting/Servicing: AHFC demonstrates adequate capabilities as originator, underwriter, and servicer, as evidenced by historical portfolio and securitization delinquency and loss performance.
Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of AHFC would not impair the timeliness of payments on the securities.
Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than the base case and could result in potential rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to all classes of 2014-1 to increased losses over the life of the transaction. Fitch’s analysis found that the notes display limited sensitivity to increased defaults and losses, showing no expected impact on the rating of the notes under Fitch’s moderate (1.5x base case loss) scenario. The notes could experience a downgrade of one rating category under Fitch’s severe (2.5x base case loss) scenario.
Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report, available at ‘www.fitchratings.com’ or by clicking on the above link.