KEY RATING DRIVERS
Strong Credit Quality: The credit quality of 2014-3, as measured by the weighted average (WA) Fair Isaac Corp. (FICO) score of 757 and internal credit score tiering, is consistent with prior 2013-2014 pools. New vehicles total 90.3% and seasoning is 13.1 months, in line with prior transactions.
Consistent Credit Enhancement: The cash flow distribution is a sequential-pay structure. Initial hard credit enhancement (CE) is 2.75% (2.50% subordination and a 0.25% reserve). A yield supplement account (YSA) boosts the effective WA APR, in turn resulting in excess spread (XS) of 2.46% in 2014-3.
Strong Portfolio/Securitization Performance: Losses on AHFC's portfolio and 2010-2014 securitizations have remained well below peak levels seen in 2008 due to strong quality originations and healthy used vehicle values which have supported higher recovery rates.
Consistent Origination/Underwriting/Servicing: AHFC demonstrates adequate capabilities as originator, underwriter, and servicer, as evidenced by historical portfolio and securitization delinquency and loss performance.
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.
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 2014-3 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 one rating category under Fitch's severe (2.5x base case loss) scenario.
Key Rating Drivers and Rating Sensitivities are further detailed in the accompanying presale report, available at 'www.fitchratings.com' or by clicking on the above link. Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in 'Honda Auto Receivables 2014-3
Additional information is available at www.fitchratings.com.
--'Global Structured Finance Rating Criteria' (
--'Rating Criteria for U.S. Auto Loan ABS' (
--'Structured Finance Tranche Thickness Metrics' (
--'Honda Auto Receivables 2014-3
Global Structured Finance Rating Criteria
Rating Criteria for U.S. Auto Loan ABS
Structured Finance Tranche Thickness Metrics
Honda Auto Receivables 2014-3
Puloma Mukherjee, +1 212-908-9131
Source: Fitch Ratings
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