Moody's Assigns Provisional Rating to Auto Loan ABS Program 2507 Series
Moody's Ratings has issued a provisional rating for the Auto Loan ABS Program 2507 Series, a transaction valued at JPY1.663 billion. The rating is based on the credit quality of the underlying auto loan receivables, the transaction structure, and the servicer's experience. The Loan Fund Trustee enters into an affiliated auto loan program agreement with the affiliated financial institution, which provides credit enhancement through a senior/subordinated structure and available excess spread.
Key Takeaways:
- The transaction involves a senior/subordinated structure, with subordination comprising approximately 16.5% of the total outstanding amount of the ABL and the Class 2 Beneficial Interest.
- The expected default rate of the underlying assets is estimated at 1.6%, based on receivable attributes, historical data on the originator's entire pool, performance data on existing securitization pools, and industry trends.
- The servicer's experience and the credit quality of the receivables are considered the primary factors influencing the rating.
- The transaction includes a cross-collateralization mechanism, allowing auto loans from other Auto Loan ABS program series to be distributed to outstanding ABLs.
- Factors leading to a downgrade of the rating include worse performance of the underlying assets than expected.
Statistics:
- Transaction value: JPY1.663 billion
- Interest Rate: Fixed
- Closing Date: July 14, 2025
- Final Maturity Date: September 18, 2031
- Total Amount of Receivables: JPY1,995,266,685 (JPY1,904,016,111 in principal)
- Annualized expected default rate: 1.6%
- Credit enhancement: approximately 12.1%
- Subordination: approximately 16.5%
Sources:
- S&P Global Ratings
- Moody's Global Approach to Rating Auto Loan- and Lease-Backed ABS (Japanese)
- Rating Methodologies page on https://ratings.moodys.com