DCR Assigns Ratings to Household Automotive Trust III, Series 1999-1
14 June 1999
DCR Assigns Ratings to Household Automotive Trust III, Series 1999-1
NEW YORK, June 11 -- Duff & Phelps Credit Rating Co. (DCR)
has assigned the following preliminary ratings to the notes issued by
Household Automotive Trust III, Series 1999-1:
Issue Amount Coupon Final Maturity Ratings
Class A-1 Notes $147,000,000 5.106% 6/19/00 'D-1+'(D-One-Plus)
Class A-2 Notes $180,220,000 5.719% 5/17/02 'AAA' (Triple-A)
Class A-3 Notes $156,010,000 6.330% 6/17/03 'AAA' (Triple-A)
Class A-4 Notes $179,050,000 6.650% 4/17/06 'AAA' (Triple-A)
Household Auto Receivables Corporation is the seller on the transaction,
Household Financial Corporation is the servicer and Household Automotive
Finance Corporation is the subservicer. The trustee is The Chase Manhattan
Bank and the underwriters are J.P. Morgan, Chase Securities Inc., Credit
Suisse First Boston and Salomon Smith Barney.
The preliminary ratings of the 1999-1 trust notes are based on Household's
extensive origination and servicing experience in consumer loans, the sound
legal structure of the transaction and 32.5 percent credit enhancement for the
Class A Notes.
In October 1997, through a subsidiary of Household International, Inc.,
Household acquired ACC Consumer Finance Corporation, located in San Diego,
Calif., and subsequently changed its name to Household Automotive Finance
Corporation (HAFC). The 1999-1 trust is the second public automobile loan-
backed transaction to be issued by Household. In this structure, non-prime
retail installment sales contracts secured by new and used automobiles, light
trucks and vans were purchased under HAFC's finance programs. HAFC will sell
the receivables to the seller and the seller will sell all its rights and
interests to Household Automotive Trust III (the issuer). The issuer will
sell the receivables to the trust, which issues the notes to investors. The
enhancement for the notes relies on the overcollateralization amount and the
reserve account. The preliminary ratings on the notes address the timely
payment of interest and the ultimate payment of principal by the respective
scheduled maturity date for such class.
Total credit enhancement available is 32.5 percent growing to 37.5 percent
for this 1999-1 versus 38.5 percent growing to 44.5 percent for 1998-1. The
lower enhancement level is justified because all excess spread as well as up
to 34.5 percent of principal collections are available to cover any potential
losses to Class A note holders prior to the replenishment of the reserve
account and payment to HFC and the seller. The collateral for this
transaction consists of $967 million of retail automobile sales contracts
originated by dealers to nonprime consumers. Nonprime borrowers are those
that may be unable to obtain traditional financing from banks, thrifts, credit
unions or captive finance companies due to past credit problems or limited
credit histories. Credit history and collateral are the two major
considerations under HAFC's (as well as other nonprime originators')
underwriting guidelines. As of the cut-off date, the receivables pool had a
weighted-average coupon (WAC) of 19.61 percent, average principal balance of
$13,974, weighted-average original term of 63 months, weighted-average
remaining term of 60 months, and no loan was more than 30 days delinquent.
Geographically diversified among 50 states, the receivables pool has its
largest concentrations in California (14 percent), Texas (13 percent), Florida
(10 percent), North Carolina (6 percent), and Georgia (6 percent).
DCR is a leading global rating agency with 32 local market offices
providing ratings and research on debt issues and insurance claims paying
ability in more than 50 countries. For additional research on Household
Automotive Trust III, Series 1999-1, visit DCR's web site at
http://www.dcrco.com (Quick Search: Household). DCR's research is also
available on Bloomberg at DCR(GO) and First Call's BondCall Direct/Research
Direct at http://www.firstcall.com, as well as through other third-party
providers.