Feb 25 - Fitch Ratings expects to assign the following ratings and Rating Outlooks to the notes issued by Hyundai Auto Lease Securitization Trust 2013-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.
Key Rating Drivers
Stable Collateral Quality: The pool is consistent with that of 2012-A, with a strong WA FICO score of 743, seasoning of 11 months and similar residual value (RV) maturity concentrations.
Aggressive Sales and Lease Portfolio Growth: Due to notable sales and lease origination growth in recent years, there could be substantially more supply of used Hyundai and Kia vehicles available for sale at auction in coming years. As this could present a risk to residual values, Fitch has accounted for this in the residual loss analysis.
Adequate CE Structure: Initial hard credit enhancement (CE) will be 16.95% and 13.50% for the class A and B notes, respectively, growing to 18.95% and 15.50% of the initial securitization value. Initial excess spread is expected to be 4.14%. Loss coverage is adequate to support Fitch’s stressed assumptions.
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 used vehicle market, leading to higher recovery rates and residual realizations.
Used Vehicle Market Uncertainty: While the wholesale used vehicle market in the U.S. is currently strong, factors such as increased new vehicle sales and lease volumes penetrating the secondary market could cause gains to subside.
Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of HCA would not impair the timeliness of payments on the securities.
Stable Origination/Underwriting/Servicing: Fitch believes HCA to be a capable originator, underwriter, and servicer, as evidenced by 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 and could result in potential rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to HALST 2013-A to increased credit and residual losses over the life of the transaction. Fitch’s analysis found that the transaction displays relatively little sensitivity to increased defaults and credit losses, showing downgrades of only one rating category even under Fitch’s severe (2.5x base case loss) scenario. The transaction shows significantly more sensitivity to residual loss volatility, though even under Fitch’s severe scenario, the class A notes would be expected to retain an investment grade rating while the class B notes would be expected to pay in full.
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