Hyundai Auto Receivables Trust 2023-A Annual Report for Investors

Hey there! Think of this as our chat about Hyundai Auto Receivables Trust 2023-A. We'll break down what they've been up to this past year in plain English. This way, you can figure out if it's a smart place for your money.

First off, it's super important to know that Hyundai Auto Receivables Trust 2023-A isn't a regular company like Hyundai Motor Company that makes cars. Instead, it's a special kind of financial entity called a "Trust." It's like a dedicated pot of money. This pot holds many auto loans. Hyundai Capital America, the "Sponsor," first made these loans to car buyers. The Trust then sells "asset-backed notes" to investors. Think of these as specialized bonds. Payments from the auto loans pay back these investors. So, when we talk about its performance, we're really talking about how well those auto loans are doing.

This annual report covers the fiscal year that ended on December 31, 2025.

1. What does this company do and how did they perform this year? Hyundai Auto Receivables Trust 2023-A is a "Trust." It collects auto loans from Hyundai Capital America, the main company behind these loans. The Trust started on March 15, 2023. It bought a group of auto loans worth about $1.65 billion. This included over 90,000 separate contracts. Most loans went to borrowers with good credit. Their average FICO score was about 720. The average interest rate (APR) was 7.0%. The average original loan term was around 68 months.

   It then sells these bundles as "asset-backed notes" to investors. On March 15, 2023, the Trust sold about $1.50 billion in these notes. They were offered in different groups, called "tranches." Examples include Class A-1, A-2, A-3, B, C, and D. Major credit rating agencies rated these notes. The top groups (Class A) got AAA ratings, showing their high credit quality. The money from people paying off their car loans keeps this Trust going. It also pays back its investors. The Trust's main job is to collect loan payments. It then pays investors using a set plan, called a "payment waterfall."

   Hyundai ABS Funding, LLC is the "Depositor." This company acts as the middleman who puts the loans into the Trust.

   Citibank, N.A. is the "Indenture Trustee." Think of them as a guardian for investors. They ensure everything runs smoothly and follows the rules. This includes overseeing the payment plan and enforcing the legal agreement.

   For an auto ABS, important measures include monthly payment rates (MPR). We also look at delinquency rates (loans 30-60+ days late). Other key metrics are net charge-off rates (uncollectible loans) and recovery rates on defaulted loans. These numbers show the health of the loan group. They also indicate how safe the asset-backed notes are.

2. Financial performance - revenue, profit, growth metrics An ABS trust's "revenue" mostly comes from interest on its auto loans. The loans started with an average interest rate of 7.0%. This means the Trust likely earned significant interest from these loans in 2025.

   An ABS trust doesn't measure "profit" like a regular company. Instead, we focus on the cash flow from the loans. This cash must cover fees (servicing, trustee, admin) and, most importantly, payments to investors. Any leftover cash after all bills are paid usually goes to the "residual certificate holder." This is often Hyundai Capital America, the sponsor. The Trust's "growth" is not about growing its assets. Instead, it's about paying down its debt (the notes) as loans are repaid.

3. Major wins and challenges this year For an auto ABS trust, a "win" means fewer late payments and defaults than expected. It also means recovering more money from bad loans. Plus, a steady cash flow that easily pays investors.

   Challenges would include more defaults or late payments than expected. Also, loans paid off too quickly (prepayments) can be a challenge. This could lower interest income for investors. Big economic changes could also hurt the Trust's performance. Examples include rising interest rates, more job losses, or lower used car prices. Lower car prices affect how much money is recovered from bad loans.

4. Financial health - cash, debt, liquidity The Trust's "debt" is the total amount owed on its asset-backed notes. This started at about $1.50 billion. This debt amortizes over time as principal payments are made from the underlying auto loans.

   An ABS trust manages its cash flow (liquidity) through its "payment waterfall" plan. This plan sets the strict order for payments. The Trust also has features that boost credit and absorb losses. These help ensure top investors get paid. These features include "overcollateralization." This means the loans' initial value ($1.65 billion) was more than the notes issued ($1.50 billion). There's also a reserve fund. It started with about $24.75 million, or 1.5% of the initial loans, to cover shortfalls. Finally, "excess spread" is the extra interest earned on loans after paying investors and fees.

5. Key risks that could hurt the investment Since this isn't a traditional stock, we're not talking about a "stock price," but rather the value and safety of the "asset-backed notes" you might invest in.

   Good News on Legal Front: The report states no major ongoing or planned legal problems exist. This covers the Trust, Hyundai Capital America (Sponsor), Hyundai ABS Funding, LLC (Depositor), and Citibank, N.A. (Indenture Trustee). This means less worry about unexpected legal costs or issues.

   Servicing Checks Out: Hyundai Capital America (the loan manager) and Citibank, N.A. (the trustee) had to prove they followed all rules for loans. They both reported they did, and independent auditors confirmed no major issues. This year, Hyundai Capital America, the "Servicer," certified they met all duties for the full year (Jan 1 - Dec 31, 2025). This is a good sign that the loans are being managed properly and by the book. This helps protect investors. Good servicing is vital. Otherwise, poor collections or errors can cause more late payments and write-offs. This hurts the Trust's cash flow.

   The main risks for investors in these notes include credit risk. This means many borrowers might default on their loans, causing losses for the Trust. This risk is mitigated by the credit enhancement features mentioned above.

   Another key risk is prepayment risk. Borrowers might pay off loans early, perhaps by refinancing or selling their car. This can lower total interest income for investors, especially if rates fall. Servicer performance risk exists because the Trust depends on Hyundai Capital America. They must collect payments and manage bad loans well. Lastly, macroeconomic risks could hurt the Trust's performance. These include rising joblessness, a recession, or lower used car prices. Such events could increase defaults and lower recovery values.

6. Competitive positioning As a securitization vehicle, Hyundai Auto Receivables Trust 2023-A does not have "competitors" in the traditional sense. Instead, investors compare its performance to other auto ABS deals. These deals come from Hyundai Capital America or other lenders. They compare factors like yield, credit ratings, and loan details (e.g., average FICO, loan-to-value ratios). They also look at past performance of similar deals from the same sponsor.

7. Leadership or strategy changes An ABS trust like this doesn't have "leadership" or a changing "strategy" like a regular company. Fixed legal documents govern its operations. These, like the indenture and servicing agreement, were set up at its start. Its "strategy" is simply to collect payments from its auto loans. It then pays them out using the set "waterfall" plan.

8. Future outlook ABS trusts typically do not issue forward-looking statements or projections. Their future depends entirely on how well the auto loans perform. This is influenced by economic conditions, consumer behavior, and the servicer's collection skills. Investors use past performance, economic forecasts, and credit agency reports. They use these to form their own view of the Trust's future.

9. Market trends or regulatory changes affecting them Beyond the compliance checks mentioned in section 5, the Trust's performance can be significantly affected by several external factors. Market interest rate trends affect how fast loans are paid off. For example, lower rates mean more refinancing. They also impact the notes' value in the secondary market. Economic conditions, such as changes in unemployment rates or consumer disposable income, directly impact borrowers' ability to make payments. Regulatory changes could also affect the servicer's work and the Trust's cash flow. These include rules about consumer lending, debt collection, or financial disclosures. For example, new consumer protection laws could alter collection procedures or increase compliance costs for Hyundai Capital America.

Understanding these points helps you assess the potential of investing in Hyundai Auto Receivables Trust 2023-A notes.