HYUNDAI FUTURENET CO., LTD.
Fitch Ratings expects to assign ratings and Rating Outlooks to
RATING ACTIONS
Entity / Debt
Rating
A-1
ST
F1+(EXP)sf
Expected Rating
A-2A
LT
Expected Rating
A-2B
LT
Expected Rating
A-3
LT
Expected Rating
A-4
LT
Expected Rating
B
LT
AA+(EXP)sf
Expected Rating
C
LT
A+(EXP)sf
Expected Rating
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VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
Collateral - Strong Credit Quality: The 2022-C pool is generally consistent with recently issued HART transactions. Positives include a weighted average (WA)
Forward-Looking Approach to Derive Base Case Loss Proxy - Stable Performance: Fitch considered economic conditions and future expectations by assessing key macroeconomic and wholesale market conditions when deriving the series loss proxy.
Securitization losses have stabilized since 2017, as outstanding transactions are tracking inside the weakest performing post-crisis deal, 2016-A. Fitch incorporated managed pool performance from 2006-2009 and 2015-2018 vintages, along with 2015-2018 securitization performance, in deriving the 1.60% base case cumulative net loss (CNL) proxy, in line with 1.60% for 2022-B but lower than 1.70% for 2022-A.
Payment Structure - Sufficient Credit Enhancement (CE): Initial hard CE totals 7.80%, 6.00% and 3.00% for the class A, B and C notes, respectively. CE is the same as in 2022-B but higher than in the previous four transactions and the 2017-2019 transactions due to the increased reserve. Initial hard CE is sufficient to withstand Fitch's base case CNL proxy of 1.60% for all classes of notes at each class's respective loss coverage multiples. Given the recent interest rate volatility, expected excess spread is lower than in 2022-B at pricing.
Seller/Servicer Operational Review - Consistent Origination/Underwriting/Servicing: Fitch regards HCA as a capable originator, underwriter and servicer for this series, evidenced by the historical performance of its managed portfolio and securitizations. Fitch last affirmed
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Unanticipated increases in the frequency of defaults could produce CNL levels higher than the base case and would likely result in declines of CE and remaining net loss coverage levels available to the notes. Additionally, unanticipated declines in recoveries could also result in a decline in net loss coverage. Decreased net loss coverage may make certain note ratings susceptible to potential negative rating actions depending on the extent of the decline in coverage.
Hence, Fitch conducts sensitivity analyses by stressing both a transaction's initial base case CNL and recovery rate assumptions and examining the rating implications on all classes of issued notes. The CNL sensitivity stresses the CNL proxy to the level necessary to reduce each rating by one full category, to non-investment grade (BBsf) and to 'CCCsf' based on the break-even loss coverage provided by the CE structure.
Additionally, Fitch conducts increases of 1.5x and 2.0x to the CNL proxy, which represent moderate and severe stresses, respectively. Fitch also evaluates the impact of stressed recovery rates on an auto loan ABS structure and the rating impact with a 50% haircut. These analyses are intended to provide an indication of the rating sensitivity of notes to unexpected deterioration of a trust's performance.
Fitch has revised its 'Global Economic Outlook' forecasts as a result of the war in
Fitch expects the North American prime auto ABS sector in the assumed adverse scenario to experience 'Virtually No Impact' on rating performance, indicating very few (less than 5%) rating or Rating Outlook changes. Fitch expects 'Virtually No Impact' on asset performance, indicating asset performance will remain broadly unaffected, and less than a 10% likelihood of a sector outlook revision by YE 2023. Fitch expects the asset performance impact of the adverse case scenario to be more modest than the scenarios shown below, which increase the default expectations by 2.0x.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Conversely, stable to improved asset performance driven by stable delinquencies and defaults would lead to increasing CE levels and consideration for potential upgrades. If CNL is 20% less than the projected proxy, the expected ratings for the subordinate notes could be upgraded by one to two categories.
Best/Worst Case Rating Scenario
International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as prepared by
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by clicking the link to the Appendix. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions'.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
The concentration in the collateral pool of 13.74% of electric vehicles, hybrid or PHEV vehicles did not have an impact on Fitch's ratings analysis or conclusion on this transaction and has no impact on Fitch's ESG Relevance Score.
Additional information is available on www.fitchratings.com
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