Fitch to Rate Hyundai Auto Lease 2014-A; Issues Presale
NEW YORK -- March 10, 2014
Link to Fitch Ratings' Report: Hyundai Auto Lease Securitization Trust 2014-A
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.
KEY RATING DRIVERS
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
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
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
The presale report is available at 'www.fitchratings.com' or by clicking on
the above link.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'Criteria for Rating U.S. Auto Lease ABS' (April 30, 2013);
--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 13,
--'Structured Finance Tranche Thickness Metrics' (July 29, 2011).
Applicable Criteria and Related Research:
Counterparty Criteria for Structured Finance and Covered Bonds
Structured Finance Tranche Thickness Metrics
Global Structured Finance Rating Criteria
Criteria for Rating U.S. Auto Lease ABS
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ON THE FITCH WEBSITE.
Autumn Mascio, +1-212-908-0896
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
Bradley Sohl, +1 212-908-0792
John H. Bella, +1-212-908-0243
Sandro Scenga, +1 212-908-0278
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