Hyundai Raises Credit Quality in Latest Securitization

Hyundai Capital America increased the credit quality in its latest securitization, resulting in the highest weighted average Fico score of any post-recession Hyundai transaction, according to a presale report by Moody’s Investors Service.

The Hyundai Auto Receivable Trust 2017-B is a $1 billion transaction backed prime retail installment auto loan contracts. The weighted average Fico for the transaction reached 749, up from 747 in the 2017-A transaction, according to the report. Previous HCA securitization pools from 2002 to 2008 had weighted average Ficos ranging from 670 to 730, but the 2017-B trust is the highest Fico seen since before the recession.

The Fico distribution of 751 to 800 in the 2017-B pool dropped to 20%, as compared to 29% in the 2017-A transaction, according to the report. Meanwhile, the distribution of a 701 to 750 Fico increased to 38%, and the distribution of a 651 to 700 Fico increased to 18% — from 32% and 11% in the prior securitization, respectively.

Additionally, 62% of the 2017-B trust’s loan pool balance has an original term of 60 months or more. “The percentage of 73 to 75 months contracts is 5% in 2017-B, higher than the 4.6% in 2017-A,” the report stated. “Although longer term loans generally have weaker performance compared to loans with shorter original payment terms, one mitigant against this risk in the 2017-B pool is the high credit quality of obligors with 73 to 75 month contracts in the transaction.” The weighted average Fico score for 73 to 75 months contracts in the 2017-B pool was 769.

The weighted average APR was 3.3%, the weighted average original term was 66 months, and the average loan size was around $20,000, according to the report.

Also of note, 51% of the loans in the HART 2017-B receivables pool were secured by Kia automobiles. “This continues a trend of incrementally greater amounts of Kia loans in HART collateral pools,” the report stated. “The performance of the subset of Kia loans that have been included in recent HART transactions has improved, and has helped contribute to lower observed losses for 2010 and later HART transactions.”

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