A securitization of retail installment auto loan contracts, extended to prime-quality borrowers, amounting to about $1.5 billion, and potentially increasing to $2.1 billion is being marketed to investors through the Honda Auto Receivables 2024-1 Owner Trust.

Due to close shortly, the transaction will issue notes through four tranches of class A notes, according to ratings analysts at Moody’s Investors Service. Regardless of the issuance amount—the deal could be $1.4 billion, $1.8 billion or $2.1 billion—all of the notes benefit from total hard initial credit enhancement representing 2.75% of the portfolio securitization amount at closing. That is composed of a non-declining reserve fund of 0.25% and 2.50% of the initial pool balance, the rating agency said. The deal also benefits from excess spread.

As for pricing expectations, the A1 notes are expected to price at par, with a 13 basis-point spread over the three-month interpolated yield curve, according to Asset Securitization Report‘s deal database. Otherwise, spreads on the A2 notes are expected to land at around 44 basis points over the benchmark through 77 basis points over the A4 notes.

Known as HAROT 2024-1, the transaction will repay investors sequentially.
As the notes are all class A, with maturity dates of Feb. 18, 2025 on the A1 notes; Sept. 15, 2026 on the A2 notes; Aug. 15, 2028 on the A3 notes and May 15, 2030 on the A4 notes, Moody’s said.

American Honda Finance originated the underlying contracts, Moody’s said. It will also service the notes, an arrangement that Moody’s considers one of the deal’s main credit strengths, given that it is highly rated, stable and has more than 20 years of securitization experience. Other credit strengths include strong credit attributes in the collateral itself, including a weighted average (WA) FICO score of 768 for all three of the pools. The pool has a high ratio of tier A loans, 77.4% for all three pools, a few notches better than the HAROT 2023-4 transaction, which saw a 77.1% concentration of tier A loans, the rating agency said.

MUFG Securities Americas, Barclays Capital, BofA Securities and Deutsche Bank Securities are lead underwriters on the deal, Moody’s said.

All of the notes scored triple-A ratings from both Moody’s and S&P Global Ratings, except the A1 notes. For those, Moody’s assigned a P1 rating, and S&P gave an A1+ rating.