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Hyundai Auto Lease Securitization Trust 2020-B Presale: Hyundai Auto Lease Securitization Trust 2020-B September 15, 2020 PRIMARY CREDIT ANALYST Preliminary Ratings Ethan Choi New York Preliminary amount Legal final (1) 212-438-1043 Class(i) Preliminary rating Type Interest rate(ii) (mil. $) maturity ethan.choi A-1 A-1+ (sf) Senior Fixed 142.00 Oct. 15, 2021 @spglobal.com A-2 AAA (sf) Senior Fixed 380.00 Jan. 17, 2023 SECONDARY CONTACT A-3 AAA (sf) Senior Fixed 380.00 Sept. 15, 2023 Sanjay Narine, CFA Toronto A-4 AAA (sf) Senior Fixed 74.39 June 17, 2024 + 1 (416) 507 2548 B AA+ (sf) Subordinate Fixed 52.94 Oct. 15, 2024 sanjay.narine @spglobal.com Note: This presale report is based on information as of Sept. 15, 2020. The ratings shown are preliminary. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. Accordingly, the preliminary ratings should not be construed as evidence of final ratings. This report does not constitute a recommendation to buy, hold, or sell securities. (i)All or a portion of one or more classes of notes may be initially retained by the sponsor Hyundai Capital America Inc. or its affiliate. (ii)The actual coupons of these tranches will be determined on the pricing date. Profile Expected closing date Sept. 23, 2020. Collateral Prime auto lease receivables. Origination trust Hyundai Lease Titling Trust. Issuer Hyundai Auto Lease Securitization Trust 2020-B. Sponsor, servicer, and administrator Hyundai Capital America Inc. (BBB+/Negative/A-2). Depositor Hyundai HK Lease LLC. Indenture trustee U.S. Bank N.A. (AA-/Stable/A-1+). Owner trustee Wilmington Trust N.A. (A/Negative/A-1). UTI, SUBI, Delaware, origination, and administrative trustee U.S. Bank Trust N.A. Lead underwriter J.P. Morgan Securities LLC (A+/Stable/A-1). UTI--Undivided trust interest. SUBI--Special unit of beneficial interest. www.standardandpoors.com September 15, 2020 1 © S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimer 2513762 on the last page. Presale: Hyundai Auto Lease Securitization Trust 2020-B Credit Enhancement Summary(i) Hyundai Auto Lease Securitization Trust 2020-B 2020-A 2019-B 2019-A Rating Class A AAA (sf) AAA (sf) AAA (sf) AAA (sf) Class B AA+ (sf) AA+ (sf) AA+ (sf) AA+ (sf) Subordination (%) Class A 4.50 4.50 4.50 4.50 Class B N/A N/A N/A N/A Overcollateralization (%) Initial 12.50 12.50 12.50 12.50 Target 13.50 13.50 13.50 13.50 Reserve account (%) Initial 1.00 0.50 0.50 0.50 Target 1.00 0.50 0.50 0.50 Total initial hard credit enhancement (%) Class A 18.00 17.50 17.50 17.50 Class B 13.50 13.00 13.00 13.00 Total target hard credit enhancement (%) Class A 19.00 18.50 18.50 18.50 Class B 14.50 14.00 14.00 14.00 Estimated excess spread per 4.02 3.70 3.63 3.50 year (%)(ii) Discount rate (%) 6.00 7.00 7.15 7.90 Total securities issued ($) 1,029,330,000 893,796,000 926,226,000 710,570,000 Initial aggregate securitization 1,176,382,864 1,021,482,211 1,058,544,313 812,087,923 value ($) (i)All percentages are based on the initial aggregate securitization value. (ii)Reflects estimated annual excess spread at the preliminary ratings and does not reflect final pricing. N/A--Not applicable. Rationale The preliminary ratings assigned to Hyundai Auto Lease Securitization Trust 2020-B's (HALST 2020-B) auto lease asset-backed notes series 2020-B reflect our view of: - The availability of approximately 24.1% and 19.4% credit enhancement for the class A and B notes, respectively, in the form of 4.50% subordination for the class A notes; 12.50% overcollateralization, which will build to a target of 13.50% of the initial securitization value; a 1.00% nonamortizing reserve account; and excess spread (all percentages are measured in terms of the pool's initial aggregate securitization value). - The credit quality of the underlying collateral, which comprises prime auto lease receivables that have a weighted average FICO score of 761. www.standardandpoors.com September 15, 2020 2 © S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimer 2513762 on the last page. Presale: Hyundai Auto Lease Securitization Trust 2020-B - Our expectation that under a moderate ('BBB') stress scenario (2.0x our expected loss level), all else being equal, our preliminary ratings on the class A and B notes are consistent with the credit stability limits specified by section A.4 of the Appendix contained in S&P Global Ratings Definitions (see "S&P Global Ratings Definitions," published Aug. 7, 2020). - The diversified mix of vehicle models in the pool. - The relatively even distribution of the expected residuals' maturities. - Automotive Lease Guide's (ALG) forecast of each vehicle's lease-inception and current residual value. - The timely interest and full principal payments by the notes' legal final maturity dates made under cash flow scenarios that were stressed for credit and residual losses and are consistent with the assigned preliminary ratings. - The transaction's payment and legal structures. Our expected credit loss for the HALST 2020-B pool is 0.90% of the securitization value, which reflects the performance of the outstanding HALST transactions, the static pool loss projections for Hyundai Capital America Inc.'s (HCA) lease originations, the performance on the managed portfolio, collateral comparisons with peers, and our forward-looking view of the economy. Our 'AAA' stress scenario for credit loss is 4.50% of the securitization value, and our 'AA+' stress is 4.05%. Our 'AAA' and 'AA+' residual stress for the HALST 2020-B pool is 27.29% and 24.14%, respectively, of the pool's aggregate undiscounted base residual value. After applying this stress to the residual value portion of the pool (65.55%) and the nondefaulting leases (91.00% under the 'AAA' stress and 91.90% under the 'AA+' stress), our 'AAA' and 'AA+' residual stress constitutes 16.28% and 14.18%, respectively, of the pool's aggregate securitization value. One of the main considerations in our analysis to derive our haircuts was a comparison of the HALST 2020-B base residual value with the historical auction proceeds data, which the issuer provided. In addition, we incorporated an analysis of the residual maturity schedule, vehicle model composition, and our views on the used-vehicle market. Our total stressed losses (credit and residual) are approximately 20.78% and 18.23% for the 'AAA' and 'AA+' rated notes, respectively, as a percentage of the initial aggregate securitization value. In our view, the credit enhancement outlined above and in the Cash Flow Modeling section below provide more than adequate support for our assigned preliminary ratings. S&P Global Ratings acknowledges a high degree of uncertainty about the rate of spread and peak of the coronavirus outbreak. Some government authorities estimate the pandemic will peak around midyear, and we are using this assumption in assessing the economic and credit implications. In our view, the measures adopted to contain COVID-19 have pushed the global economy into recession (see our macroeconomic and credit updates here: www.spglobal.com/ratings). As the situation evolves, we will update our assumptions and estimates accordingly. Changes from HALST 2020-A The structural and credit enhancement changes from HALST 2020-A include the following: - The reserve account increased to 1.00% from 0.50%. - The discount rate decreased to 6.00% from 7.00%. www.standardandpoors.com September 15, 2020 3 © S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimer 2513762 on the last page. Presale: Hyundai Auto Lease Securitization Trust 2020-B The collateral changes from the prior transaction are as follows: - The base residual as a percentage of securitization value increased to 65.55% from 63.13%. - The percentage of leases with an original term of 37-42 months increased to 8.12% from 1.38%, while the percentage of leases with an original term of 43-48 months decreased to 19.23% from 26.93%. - The top five vehicles are the Tucson, Sportage, Santa Fe, Sonata, and Sorento; and they aggregate to approximately 53.67% of the pool as a percentage of securitization value, which is higher than the series 2020-A pool's 51.34%. - Genesis-branded vehicles are included for the fifth time, and they comprise 3.99% of the pool's securitization value, up from 2.98% for the series 2020-A pool. The Genesis-branded vehicles in the series 2020-B pool are the G70, G80, and G90 models. - The percentage of SUVs/crossovers increased to 58.99% from 58.16%. - The Kia Telluride SUV is included in the collateral pool for the third time (increasing to 7.15% of securitization value from 6.44%), while the Hyundai Palisade SUV is included for the second time (increasing to 5.77% of securitization value from 1.75%). Transaction Overview HALST 2020-B will be HCA's 20th auto lease transaction and its second in 2020. HCA also issued numerous prior auto loan transactions. The series 2020-B transaction is structured similarly to HCA's previous transactions and other lease securitizations with nonamortizing target credit enhancement. The pool's structure incorporates an initial reserve amount equal to 1.00% of the initial securitization value and a 12.50% overcollateralization amount, which builds to a target of 13.50% of the initial securitization value.
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