Fitch Rates Honda Auto Receivables 2015-3 Owner Trust; Outlook Stable
--\\$289,200,000 class A-1 'NR';
--\\$327,000,000 class A-2 'AAAsf'; Outlook Stable;
--\\$360,000,000 class A-3 'AAAsf'; Outlook Stable;
--\\$163,000,000 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 2.26%, all consistent with 2015-2.
Strong Portfolio/Securitization Performance: Losses on AHFC's 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 Outlook. 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.
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 2015-3 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 two rating categories under Fitch's severe (2.5x base case loss) scenario.