PriyaPatelTLDR:
American Honda Finance is preparing to sell up to $2.1 billion in prime auto ABS through the Honda Auto Receivables 2024-1 Owner Trust. The transaction will issue notes through four tranches, with pricing expectations ranging from 13 to 77 basis points over the benchmark. The deal benefits from strong credit attributes, including a high ratio of tier A loans and a weighted average FICO score of 768.
A securitization of retail installment auto loan contracts, extended to prime-quality borrowers, amounting to about $1.5 billion, and potentially increasing to $2.1 billion is being marketed to investors through the Honda Auto Receivables 2024-1 Owner Trust. Due to close shortly, the transaction will issue notes through four tranches of class A notes, according to ratings analysts at Moody’s Investors Service. The notes benefit from total hard initial credit enhancement representing 2.75% of the portfolio securitization amount at closing, composed of a non-declining reserve fund of 0.25% and 2.50% of the initial pool balance. The deal also benefits from excess spread.
As for pricing expectations, the A1 notes are expected to price at par, with a 13 basis-point spread over the three-month interpolated yield curve, according to Asset Securitization Report’s deal database. Spreads on the A2 notes are expected to land at around 44 basis points over the benchmark through 77 basis points over the A4 notes. The transaction, known as HAROT 2024-1, will repay investors sequentially, with all notes being class A and having different maturity dates. Ratings agencies Moody’s and S&P Global Ratings have assigned triple-A ratings to all of the notes except for the A1 notes, which were assigned a P1 rating and A1+ rating, respectively.
American Honda Finance originated the underlying contracts and will service the notes, a credit strength of the deal according to Moody’s, given the firm’s highly rated, stable, and experienced history in securitization. The collateral itself has strong credit attributes, including a high ratio of tier A loans and a weighted average FICO score of 768 across all three pools. The deal has lead underwriters including MUFG Securities Americas, Barclays Capital, BofA Securities, and Deutsche Bank Securities.
In conclusion, the securitization of prime auto ABS by American Honda Finance represents a significant opportunity for investors, with strong credit attributes in the collateral and favorable pricing expectations for the notes.
