Honda Auto Receivables 1999-1 Owner Trust Notes Rated
22 January 1999
Honda Auto Receivables 1999-1 Owner Trust Notes Rated by Fitch IBCA - Fitch IBCA -
NEW YORK, Jan. 21 -- Fitch IBCA expects to rate Honda Auto
Receivables 1999-1 Owner Trust's $179.424 million 4.974% class A-1 notes 'F1+'
and $195 million 5.186% class A-2, $208 million 5.30% class A-3 and $110.608
million 5.35% class A-4 notes 'AAA'. The certificates are initially being
retained by the seller and are not rated.
The expected ratings on the notes reflect the available credit
enhancement, the transaction's sound legal structure and the high quality of
the retail auto receivables originated and serviced by American Honda Finance
Corp. (AHFC). Credit enhancement is provided by a 5% subordinated certificate
piece, as well as a 0.75% reserve account, which is non-declining. As the
pool amortizes, the reserve account will grow as a percentage of the
outstanding collateral balance, effectively increasing credit enhancement.
Fitch IBCA's ratings address the likelihood of full payment of interest
and principal by the final distribution date of each class. Principal and
interest on the notes is expected to be distributed monthly, commencing Feb.
16, 1999. The 1999-1 transaction marks the first time that AHFC utilized an
owner trust, having issued grantor trusts for its past six securitizations.
Principal is distributed sequentially to each class of class A notes. Once
the class A-1 notes are paid in full, principal is distributed to the
certificates on a pro rata basis with the class A notes.
The class A notes continue to be paid out on a sequential basis. However,
in the event that the reserve fund on any distribution date would be less than
its specified level, the notes will receive all of the principal collections
until the reserve account is funded up to its specified level again. Other
structural features include a yield supplement account, the purpose of which
is to augment interest collections on those receivables whose annual
percentage rate (APR) is less than the highest bond rate plus the 1% servicing
fee.
Business and credit stress scenarios are applied to the collateral to
insure the structure is sufficient to withstand 'AAA' scenarios. Under the
available credit enhancement the class A notes can sustain 5 times Fitch
IBCA's base case cumulative net loss estimate, which is consistent with a
'AAA' rating.
In contrast to previous Honda securitizations, the 1999-1 pool includes
retail auto loan contracts backed by both new and used vehicles.
Approximately 91.5% of the principal balance of the receivables pool
represents financing for new vehicles, as opposed to 100% in previous Honda
securitizations. The average remaining balance is $12,385, up from $10,861 in
the Honda 1997-B transaction, which may in part be attributable to the reduced
seasoning of the 1999-1 receivables pool. Weighted average seasoning on the
pool is 5.5 months in the 1999-1 transaction compared to 11 months in the
1997-B transaction.
The pool is concentrated in California (34%), Texas (6.3%), New Jersey
(5.82%) and Illinois (5.77%). No other state represents more than 5% of the
pool. As of the cutoff date, the receivables had a weighted average remaining
maturity of 47.86 months, compared to 44 months in the 1997-B Honda
transaction. The lower weighted average APR of 7.03%, down from 7.66% in the
1997-B transaction, is a result of the inclusion of more subvented loans in
the pool.
AHFC, the captive finance subsidiary of American Honda Motor Co. (AHMC),
originates and services the retail auto sales contracts. AHMC is a wholly
owned subsidiary of Honda Motor Company, Japan's third largest car
manufacturer.