Fitch to Rate Honda Auto Receivables 2015-3 Owner Trust; Issues Presale

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings expects to assign the following ratings and Rating Outlooks to the Honda Auto Receivables (HAROT) 2015-3 Owner Trust notes:

--$221,250,000 class A-1 'NR';

--$250,000,000 class A-2 'AAAsf'; Outlook Stable;

--$275,000,000 class A-3 'AAAsf'; Outlook Stable;

--$125,000,000 class A-4 'AAAsf'; Outlook Stable.

KEY RATING DRIVERS

Strong Credit Quality: The credit quality of 2015-3, as measured by the weighted average (WA) Fair Isaac Corp. (FICO) score of 761 and internal credit score tiering, is consistent with recent pools. New vehicles total 93%, and the WA seasoning is 13 months.

Consistent Credit Enhancement Structure: The cash flow distribution is a sequential-pay structure. Initial hard credit enhancement (CE) is 2.75% (subordination of 2.50% and a 0.25% reserve). A yield supplement account (YSA) increases the effective WA APR and, thus, excess spread (XS), which totals 2.07%, all consistent with 2015-2.

Strong Portfolio/Securitization Performance: Losses on American Honda Finance Corporation's (AHFC) portfolio and 2010 - 2014 securitizations have been low historically and remained well below peak levels from 2008 due to stronger quality originations and healthy used vehicle values. Fitch's base case loss proxy remains at 0.90%; however, pool-factor projections of recent HAROT securitizations suggest 2015-3 could be expected to perform within a 0.35% - 0.45% range, assuming stable macroeconomic conditions.

Stable Corporate Health: Fitch rates AHFC 'F1' and its parent, Honda, 'F1/A'/Stable. AHFC has recorded positive corporate financial results in recent years, while the overall health of Honda has remained strong.

Consistent Origination/Underwriting/Servicing: AHFC demonstrates adequate capabilities as originator, underwriter and servicer, as evidenced by historical portfolio delinquency and loss experience and securitization performance. Fitch deems AHFC capable of servicing 2015-3.

Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of AHFC would not impair the timeliness of payments on the securities.

RATING SENSITIVITIES

Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than the base case. This in turn could result in potential rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to all classes of 2015-2 to increased losses over the life of the transaction. Fitch's analysis found that the notes display limited sensitivity to increased defaults and losses, showing no expected impact on the rating of the notes under Fitch's moderate (1.5x base case loss) scenario. The notes could experience a downgrade of two rating categories under Fitch's severe (2.5x base case loss) scenario.

DUE DILIGENCE USAGE

Fitch was provided with third-party due diligence information from KPMG LLP. The third-party due diligence focused on a random sample of 287 receivables selected from 95,805 receivables (as of June 30, 2015). A comparison was made of the various attributes of each of the selected receivables (first payment date, original amount financed, among others) in the data file to contractual documents provided by the company. Based on the results of the procedures, KPMG concluded with a 99% confidence level that the maximum estimated error occurrence rate for each of the attributes does not exceed 5%.

Fitch considered this information in its analysis and concluded that there was no impact on the results of the analysis of HAROT 2015-3. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained on the bottom of the related rating action commentary (RAC). As such, no adjustments were made to Fitch's analysis.

Fitch's analysis of the Representation and Warranties (R&W) of this transaction can be found in:

--'Honda Auto Receivables 2015-3 Owner Trust Appendix'.

These R&W are compared to those of typical R&W for the asset class as detailed in Fitch's June 12, 2015 special report:

--'Representations, Warranties, and Enforcement Mechanisms in the Global Structured Finance Transactions'.

Additional information is available at www.fitchratings.com.

Honda Auto Receivables 2015-3 Owner Trust (US ABS)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869404

Applicable Criteria

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Rating Criteria for U.S. Auto Loan ABS (pub. 10 Apr 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863979

Related Research

Honda Auto Receivables 2015-3 Owner Trust Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869557

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=989245

ABS Due Diligence Form 15E

https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=989245&flm_nm=15e_989245_1.pdf

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=989245

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150810005704/en/

Fitch Ratings
Primary Analyst
Puloma Mukherjee
Associate Director
+1-212-908-9131
Fitch Ratings, Inc.
33 Whitehall Street,
New York, NY, 10004
or
Secondary Analyst
Yun Tian
Associate Director
Phone +1-212-908-0307
or
Committee Chairperson
Hylton Heard
Senior Director
+1-212-908-1214
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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