CHICAGO, IL – April 24, 2013 – (Motor Sports Newswire) – Fitch Ratings assigns the following ratings to the Harley-Davidson Motorcycle Trust 2013-1 notes:
- $99,000,000 class A-1 asset-backed notes ‘F1+sf’;
- $235,000,000 class A-2 asset-backed notes ‘AAAsf’; Outlook Stable;
- $207,000,000 class A-3 asset-backed notes ‘AAAsf’; Outlook Stable; and
- $86,539,000 class A-4 asset-backed notes ‘AAAsf’; Outlook Stable;
- $22,461,000 class B asset-backed notes ‘AAsf’; Outlook Stable.
Key Rating Drivers
Strong Credit Quality: While credit quality, as measured by FICO, has weakened versus the prior three transactions, the 2013-1 pool is stronger than all issued prior to 2009, before the implementation of underwriting changes. Despite the slightly weaker 2013-1 pool, the improved performance of the managed portfolio and prior securitizations offsets this negative shift.
Sufficient Credit Enhancement Structure: All classes benefit from a reserve account that will be funded at close at 1.00% of the initial pool balance and overcollateralization (OC) of 4.50%. The class A notes also benefit from subordination of 3.30%. Overall, initial CE is down from 2012-1. Additionally, all classes benefit from annual excess spread of approximately 9.79%.
Improving Portfolio/Securitization Performance: Portfolio and securitization delinquencies and losses have continued to trend lower from 2009-2012. This is driven by a stabilizing economy, underwriting changes that began in 2008, and Harley resale values that are currently at their strongest levels in years.
Stable Corporate Health: HDCC has exhibited good capabilities as an originator, underwriter, and servicer of its managed portfolio and securitizations. Further, Harley-Davidson Financial Services (HDFS), the parent of HDCC, is rated ‘F2/A-‘ and its parent, HOG, is rated ‘A-‘ with a Stable Rating Outlook by Fitch. Fitch deems HDCC an adequate servicer to service 2013-1.
Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of HDCC 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 and could result in potential rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to HDMOT 2013-1 to increased credit losses over the life of the transaction. Fitch’s analysis found that the transaction displays some sensitivity to increased defaults and credit losses, showing potential downgrades of one category under Fitch’s moderate (1.5x base case loss) scenario. The notes could experience downgrades of up to two to three rating categories under Fitch’s severe (2.5x base case loss) scenario.
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Individual Representations, Warranties, and Enforcement Mechanisms reports are available for all structured finance transactions initially rated on or after Sept. 26, 2011 at ‘www.fitchratings.com‘.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
- ‘Global Structured Finance Rating Criteria’, Aug. 2, 2012;
- ‘Rating Criteria for U.S. Auto Loan ABS’, April 10, 2013;
- ‘Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions — Amended’, April 17, 2012
Applicable Criteria and Related Research
Global Structured Finance Rating Criteria
Rating Criteria for U.S. Auto Loan ABS
Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions — Amended