Standard & Poor's Rates Hyundai Auto Receivables Trust-1998A Notes AAA
20 May 1998
Standard & Poor's Rates Hyundai Auto Receivables Trust-1998A Notes AAA
NEW YORK, May 20 -- Standard & Poor's today assigned its
triple-'A' rating to Hyundai Automobile Receivables Trust 1998-A's
$220 million class A-1 5.9% notes and $80.15 million class A-2 6.05% notes
based on the insurance policy provided by MBIA Insurance Corp. (triple-'A'
financial strength rating).
Under this policy, MBIA unconditionally and irrevocably guarantees timely
payment of interest and ultimate payment of principal. Standard & Poor's has
determined that the underlying transaction risk assumed by MBIA is consistent
with an investment-grade rating based on a sound legal structure and internal
credit support consisting of a cash reserve, subordination of 13% , and annual
excess spread of approximately 5.50%. Additional support is provided by a
fully funded yield maintenance account to cover interest shortfalls due to
loans in the receivables pool that have annual percentage rates that are below
the sum of the weighted average note rate, the servicing fee, the note
insurer's premium and fees for the indenture and owner trustees.
The originator and servicer of the receivables is Hyundai Motor Finance
Co., a wholly owned subsidiary of Hyundai Motor America, which in turn, is a
wholly owned subsidiary of Hyundai Motor Co. (HMC). Hyundai Motor Finance is
located in Fountain Valley, Calif. and purchases motor vehicle retail
installment sales contracts directly from franchised dealers. The car
dealerships from which contracts are originated are owned by the parent
company, Hyundai Motor Co. Hyundai Motor Finance has dealer agreements with
over 95% of the dealers franchised by Hyundai Motor America in the U.S. with a
core of 75 to 80 dealers that use Hyundai Motor Finance as their primary
financing source. Hyundai Motor America is the exclusive importer of HMC
automobiles, parts, and accessories in the U.S. and is currently distributing
through approximately 475 authorized dealers. HMC has grown to become Korea's
largest automobile manufacturer while exporting to more than 160 countries.
One of Hyundai Motor Finance's primary objectives is to support Hyundai Motor
America vehicle sales by providing financing to the purchasers of Hyundai
vehicles. Typical obligors have credit histories that may show some prior
uneven performance and in general are considered to have a higher risk of
default. As a result of the credit profiles of the obligors, the historical
loss and delinquency rates on Hyundai Motor Finance's contracts have been
higher than other captive finance companies. Hyundai Motor Finance's
portfolio size was $475 million at Dec. 31, 1995; $425 million at
Dec. 31, 1996; and nearly $488 million at Dec. 31, 1997. Although the credit
scores of its customer mix have not varied substantially over the past three
to four years, performance has shown an increase in annualized net losses
since 1995. Net losses as a percentage of average principal amount outstanding
were 2.0% at Dec. 31, 1995; 5.1% at Dec. 31, 1996; and 3.9% at Dec. 31, 1997.
The spike in the 1996 performance reflects the severe impact of the relocation
of the service center from Missouri to California in 1996. Delinquencies as a
percentage of contracts outstanding were 11.2% at Dec. 31, 1995; 10% at
Dec. 31, 1996; and 11% at Dec. 31, 1997.
The 1998-A receivables pool is composed of $298.5 million in motor
vehicle retail installment sales contracts and $46.5 million (13% of total
transaction size) in the pre-funding account that will be used to originate
receivables over the next three months. The weighted average annual
percentage rate is 14.92%. The largest state concentrations are in Illinois
(10%) and Texas (9%). The percentage of new cars is approximately 78% of the
initial receivables, with a weighted average original maturity of 59 months
and seasoning of 15 months.
This is Hyundai Motor Finance's second securitization rated by Standard &
Poor's. The prior transaction was completed in 1993 and performed within
expectations, Standard & Poor's said. -- CreditWire