Hyundai Auto Lease Securitization Trust 2018-A.

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1 Presale: Hyundai Auto Lease Securitization Trust 2018-A This presale report is based on information as of Feb. 15, The ratings shown are preliminary. This report does not constitute a recommendation to buy, hold, or sell securities. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. Preliminary Ratings Class Preliminary rating(i) Type Interest rate(ii) Preliminary amount (mil. $)(iii) Legal final maturity A-1 A-1+ (sf) Senior Fixed March 15, 2019 A-2A/A-2B AAA (sf) Senior Fixed/floating(iii) Aug. 17, 2020 A-3 AAA (sf) Senior Fixed April 15, 2021 A-4 AAA (sf) Senior Fixed March 15, 2022 B AA+ (sf) Subordinate Fixed Jan. 17, 2023 (i)the rating on each class of securities is preliminary and subject to change at any time. (ii)the interest rate for each class will be determined on the pricing date. (iii)the class A-2 notes will be split into fixed-rate class A-2-A notes and floating-rate class A-2-B notes. The sizes of classes A-2-A and A-2-B will be determined at pricing; the maximum size of class A-2-B will be 50% of the aggregate principal balance of the class A-2 notes. The class A-2-B coupon will be expressed as a spread tied to one-month LIBOR. Profile Expected closing date Feb. 28, Collateral Prime auto lease receivables. Origination trust Hyundai Lease Titling Trust. Issuer Hyundai Auto Lease Securitization Trust 2018-A. Primary Credit Analyst: Jennie P Lam, New York (1) ; jennie.lam@spglobal.com Secondary Contact: Ethan Choi, New York (1) ; ethan.choi@spglobal.com See complete contact list on last page(s) FEBRUARY 15,

2 Profile (cont.) Sponsor, servicer, and administrator Depositor Indenture trustee Owner trustee UTI, SUBI, Delaware, origination, and administrative trustee Lead underwriter Hyundai Capital America (A-/Negative/A-2). Hyundai HK Lease LLC. U.S. Bank N.A. (AA-/Stable/A-1+). Wilmington Trust N.A. (A/Stable/A-1). U.S. Bank Trust N.A. SG Americas Securities LLC. UTI--Undivided trust interest. SUBI--Special unit of beneficial interest. HALST Credit Enhancement Summary(i) Rating 2018-A 2017-C 2017-B Class A AAA (sf) AAA (sf) AAA (sf) Class B AA+ (sf) AA+ (sf) AA+ (sf) Subordination (%) Class A Class B N/A N/A N/A Overcollateralization (%) Initial Target Step-down target after class A-2 payout Reserve account (%) Initial Target Total initial hard credit enhancement (%) Class A Class B Total target hard credit enhancement (%) Class A Class B Total step-down target hard credit enhancement after class A-2 payout (%) Class A Class B Estimated excess spread per year (%)(ii) Discount rate (%) Total securities issued ($) 904,200, ,630, ,870,000 Initial aggregate securitization value ($) 1,033,368,258 1,017,871,804 1,117,582,350 (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. HALST--Hyundai Auto Lease Securitization Trust. N/A--Not applicable. FEBRUARY 15,

3 Rationale The preliminary ratings assigned to Hyundai Auto Lease Securitization Trust 2018-A's (HALST 2018-A's) $ million auto lease asset-backed notes series 2018-A reflect our view of: The availability of approximately 25.0% and 20.9% credit enhancement for the class A and B notes, respectively, in the form of 4.50% subordination to the class A notes; 12.50% overcollateralization, which will build to a target of 14.50% of the initial securitization value and steps down to 13.50% after the class A-2 notes are paid in full; a 0.50% 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 746 weighted average FICO score. Our expectation that under a moderate 'BBB' stress scenario, all else being equal, our preliminary ratings on the class A notes would not be lowered, the preliminary rating on the class B notes would not be lowered more than one rating category for the transaction's life. This is in line with our ratings stability criteria, which state that 'AAA' and 'AA' ratings will remain within one rating category for the first year, under moderate stress conditions. (see "Methodology: Credit Stability Criteria," published May 3, 2010). The diversified mix of vehicle models in the pool. The relatively even distribution of the expected residuals' maturities. Automotive Lease Guide's (ALG's) 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 2018-A pool is 1.15% of the securitization value, which reflects the performance of the outstanding Hyundai lease transactions, the static pool loss projections for Hyundai Capital America's (HCA's) lease originations, the performance on the managed portfolio, collateral comparisons with peers, and our forward-looking view of the economy, namely our expectation for lower used vehicle values (see the Collateral Analysis section below for more information). Our 'AAA' stress scenario for credit loss is 5.75% of the securitization value, and our 'AA+' stress is 5.18%. Our 'AAA' and 'AA+' residual stress for the HALST 2018-A pool is 26.48% and 23.43%, respectively, of the pool's aggregate undiscounted base residual value. After applying this stress to the residual value portion of the pool (63.99%) and the nondefaulting leases (88.50% under the 'AAA' stress and 89.65% under the 'AA+' stress), our 'AAA' and 'AA+' residual stress constitutes 15.00% and 13.10%, 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 2018-A 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 20.8% and 18.3% 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) provides more than adequate support for our assigned preliminary ratings. FEBRUARY 15,

4 Changes From HALST 2017-C The collateral changes from the prior transaction are as follows: The base residual as a percentage of the securitization value decreased to 63.99% from 65.55%. The percentage of leases with an original term of up to 24 months increased to 3.04% from 2.42%, and the percentage with an original term of months increased to 68.47% from 61.30%. The percentage with an original term of months decreased to 2.19% from 6.02%, while the percentage with an original term of months decreased to 26.31% from 30.25%. The top five vehicle models are the Elantra, Sorento, Santa Fe, Tucson, and Optima, which make up approximately 62.2% of the series 2018-A pool's securitization value, which is a decrease from 63.7% for the series 2017-C pool. The percentage of cars increased to 49.0% from 45.6% Transaction Overview The series 2018-A transaction will be HCA's 15th auto lease transaction overall and the first in HCA has also issued several prior auto loan transactions. The series 2018-A transaction is structured similarly to HCA's previous transactions and to other lease securitizations with nonamortizing target credit enhancement. The pool's structure incorporates an initial reserve amount equal to 0.50% of the initial securitization value and a 12.50% overcollateralization amount, which builds to a target of 14.50% of the initial securitization value; once class A-2 is paid in full, the target overcollateralization will step down to 13.50% of the initial securitization value. The series 2018-A pool's estimated excess spread is approximately 3.87% per year. The transaction uses a sequential-pay method in which it can't release hard credit support until all the rated notes are paid in full, with the exception of the 100-basis-point overcollateralization release after class A-2 is paid in full, in line with the overcollateralization target step-down. Excess spread, however, can be released as long as the overcollateralization is at its target level. The series 2018-A pool will securitize mainly 36-month leases (68.5%) and 48-month leases (26.3%) originated by HCA. The monthly lease payments and lease residual values will serve as the notes' collateral. The securitized pool will comprise 11 Kia and nine Hyundai models and will consist primarily of 2017 and 2018 model vehicles. All of the leased vehicles included in the transaction will be titled in the origination trust's name, Hyundai Lease Titling Trust, a Delaware statutory trust created in November The origination trust will issue a transaction special unit of beneficial interest (SUBI) certificate, which represents a beneficial interest in the origination trust that relates solely to the specified auto lease receivables and related residual values that are dedicated to repaying the SUBI and, ultimately, the rated notes. HALST 2018-A will own the rights, title, and interest to the SUBI certificate and will pledge the SUBI certificate to the indenture trustee for the noteholders' benefit. Legal Structure On the closing date, HCA will sell, transfer, and assign the transaction's SUBI certificate to Hyundai HK Lease LLC (the depositor) as a true sale. The depositor will then transfer and assign the SUBI certificate to HALST 2018-A (the issuing FEBRUARY 15,

5 entity), a newly formed Delaware statutory trust. The issuing entity will pledge the SUBI certificate to the indenture trustee as security for the class A and B notes, each of which will represent an obligation of the issuing entity (see chart 1 for the transaction structure). Pension Benefit Guaranty Corp. (PBGC) can file a lien against the assets of any member of Hyundai Motor Co.'s (Hyundai's) controlled group if minimum contribution payments to Hyundai's defined benefit pension plan are not paid as required by law, or if Hyundai terminates an underfunded defined benefit pension plan. As a member of the controlled group, HCA's assets could be subject to any PBGC lien (including those leases and vehicles designated to the SUBI, which serve as the source of payments on the issued notes) if Hyundai's minimum contribution payments are not made or if Hyundai terminates an underfunded defined benefit plan. In our opinion, the risk of a PBGC lien on the leases and residuals assigned to the SUBI, which is pledged to the notes, is mitigated by the relatively small size of the pension plan relative to the origination trust assets, as well as the company's historical ability to keep the plan funded at the appropriate levels. FEBRUARY 15,

6 Payment Structure On each payment date, distributions will be made from available funds according to the payment priority shown in table 1. Principal will be paid on the notes sequentially. Table 1 Payment Waterfall Priority Payment 1 Advance reimbursements to the servicer. 2 Pro rata, the 1.00% servicing fee to the servicer and the $5,000 per collection period administration fee to the administrator. 3 Note interest, pro rata, to the class A noteholders. 4 The first priority principal distribution amount, paid sequentially (if the class A notes' balance, as of the preceding payment date, is greater than the aggregate securitization value at the end of the related collection period) to the noteholders. 5 Note interest to the class B noteholders. 6 The second priority principal distribution amount, paid sequentially (if the class A and B notes' balance, as of the preceding payment date, is greater than the aggregate securitization value at the end of the related collection period) to the noteholders. 7 To the reserve account, until it reaches the required amount. 8 The regular principal distribution amount, sequentially, to the noteholders(i). 9 Pro rata, to the indenture trustee, the origination trustee, or the owner trustee, any amounts due according to the transaction documents. 10 Any excess amounts to the certificateholder. (i)the regular principal distribution amount is designed to build the initial overcollateralization level to 14.50% of the initial securitization value target. Once class A-2 is paid in full, the target will step down to 13.50%. All of the required payments on the notes will be due and payable on each payment date (the 15th of each month beginning March 15, 2018). On each payment date after note acceleration following an event of default, the indenture trustee will distribute the available funds according to the payment priority shown in table 2. Table 2 Event Of Default Payment Waterfall Priority Payment 1 Pro rata, to the indenture, origination, and owner trustees, for any accrued and unpaid fees, expenses, and indemnity payments under the indenture, the origination trust agreement, or the trust agreement as applicable, provided, however, that aggregate expenses payable to the indenture, origination, and owner trustees under this item are limited to $500,000 per year in the aggregate. 2 Advance reimbursements to the servicer. 3 Pro rata, the 1.00% servicing fee to the servicer and the $5,000 per collection period administration fee to the administrator. 4 Note interest, pro rata, to the class A noteholders. 5 If an indenture default has occurred from a payment or bankruptcy default, then the following priority will apply: first, principal to the class A-1 noteholders until paid in full; then principal, pro rata, to the class A-2, A-3, and A-4 noteholders until paid in full; then interest to the class B noteholders; and then principal to the class B noteholders until paid in full. 6 If an indenture default has occurred from a breach of a representation, warranty, or covenant, then the following priority will apply: first, interest to the class B noteholders; then principal to the class A-1 noteholders until paid in full; then principal, pro rata, to the class A-2, A-3, and A-4 noteholders until paid in full; and then principal to the class B noteholders until paid in full. 7 To the indenture trustee, the origination trustee, or the owner trustee for any accrued and unpaid fees, expenses, and indemnity payments. 8 Any excess amounts to the certificateholder. FEBRUARY 15,

7 Residual Value The notes issued to finance the HALST 2018-A pool will be secured by leases with an aggregate securitization value of $1,033,368,258. The leases' securitization value is the sum of the present value of each lease's remaining monthly payments and the present value of the leased vehicle's base residual value (both discounted at 7.50%). Each leased vehicle's base residual value will equal the least of the stated residual value set by HCA at the lease's inception, the maximum residualized manufacturer's suggested retail price (MRM) residual value estimate established by the ALG at the lease's inception, and the maximum ALG's refreshed MRM residual value estimate from its January-February 2018 edition. The MRM is an ALG adjustment that effectively caps the value of certain vehicle extras and optional equipment. HCA's stated residual value is the residual value of each vehicle assigned at the leases' inceptions--as stated in the lease contract--that determines the monthly payments for the individual leases. The stated residual values are typically set higher than the ALG residual value to reduce the lease payments that the lessees owe under the lease contracts (a process called lease subvention). Therefore, the definition of the securitization's base residual value provides a more conservative estimate of each vehicle's future value and helps to mitigate noteholders' exposure to losses associated with lease subvention. The undiscounted base residual is $661,257,043, or 63.99% of the HALST 2018-A pool's securitization value. Managed Portfolio The managed portfolio has seen substantial growth since 2010, as a result of Hyundai's large market-share growth. As of Dec. 31, 2017, Hyundai's total serviced lease portfolio comprised 856,274 contracts totaling $17.4 billion, up from 786,397 contracts totaling $16.3 billion as of Dec. 31, As of Dec. 31, 2017, total delinquencies remained flat at 1.51% from a year earlier. Net losses, as a percentage of the average dollar amount of lease contracts outstanding, increased to 0.61% for the year ended Dec. 31, 2017, from 0.56% a year earlier. Table 3 Total Managed Portfolio Year ended Dec Lease contracts outstanding (mil. $) 17, , , , , , Avg. dollar amount of leases outstanding (mil. $) 16, , , , , , No. of contracts outstanding 856, , , , , , plus-day delinquencies (%)(i) No. of repossessions (%)(ii) Net losses (%)(iii) Vehicles returned to HCA (%)(iv) FEBRUARY 15,

8 Table 3 Total Managed Portfolio (cont.) Total gain (or loss) on ALG residuals on vehicles returned to HCA(%)(v) Year ended Dec (6.76) (7.22) (7.67) (1.00) (i)as a percentage of the number of contracts outstanding. (ii)as a percentage of the average number of lease contracts outstanding. (iii)as a percentage of the average dollar amount of leases outstanding. (iv)as a percentage of the number of vehicles scheduled to terminate. Rounded. (v)as a percentage of ALG's residual value of returned vehicles sold by HCA. HCA--Hyundai Capital America. ALG--Automotive Lease Guide. As of Dec. 31, 2017, Hyundai's total serviced lease portfolio reported residual losses on returned vehicles that equaled 6.76% of the vehicles' ALG forecast residual values. We believe this is expected given that Hyundai reported residual gains from 2010 to 2013 when used vehicle values generally increased. As market values improved, residual values were reset generally higher, and this led to narrower residual gains and a small amount of residual losses beginning in Still, residual losses remain significantly lower than the cyclical high of 13.49% in The car segment of the market has come under pressure in recent months as gas prices remain significantly lower than in This has affected not only electric and hybrid vehicles but high-miles per gallon gas vehicles as well. Conversely, the large truck and SUV segments have benefitted from low gas prices. Our criteria provide for concentration limits on certain vehicle segments, among them compact and hybrid vehicles, full-size trucks, full-size and mid-size SUVS, and minivans. Any excess above such concentration limits is haircut and added to the base residual stress as detailed under the Residual risk heading of the S&P Global Ratings' Expected Credit And Residual Losses section below. After three years of low return rates (in the low teens) from 2011 to 2013, return rates have started to inch up as vehicle supply grows and consumers increasingly turn to larger, less fuel-efficient vehicles; return rates were 33% for Dec. 31, Hyundai does not count a purchase of the underlying vehicle by the grounding dealer as a return, which results in return rates that appear to be lower than those of peers. The dollar amount of outstanding lease contracts in the Kia portfolio increased approximately 11% as of Dec. 31, 2017, compared with the same period a year ago; the outstanding dollar amount of the Hyundai portfolio increased approximately 14% over the same period. The delinquency and net loss percentages for the Hyundai and Kia portions of the total lease portfolio are shown in tables 4 and 5, respectively. The Hyundai portion demonstrated a two-basis-points increase in total delinquencies as of Dec. 31, 2017, compared with Dec. 31, 2016, and the Kia portion demonstrated a five-basis-point decrease over the same period. The number of repossessions as a percentage of the average number of lease contracts outstanding also increased over the same period. Hyundai's and Kia's net losses increased by two basis points and seven basis points for the year ended Dec. 31, 2017, over those for Dec. 31, This HALST 2018-A's collateral pool has approximately a 50%/50% split between Hyundai and Kia vehicles. FEBRUARY 15,

9 Table 4 Hyundai Managed Portfolio Year ended Dec Lease contracts outstanding (mil. $) 9, , , , , , Avg. dollar amount of leases outstanding (mil. $) 9, , , , , , No. of contracts outstanding 457, , , , , , plus-day delinquencies (%)(i) No. of repossessions (%)(ii) Net losses (%)(iii) (i)as a percentage of the number of contracts outstanding. (ii)as a percentage of the average number of lease contracts outstanding. (iii)as a percentage of the average dollar amount of leases outstanding. Table 5 Kia Managed Portfolio Year ended Dec Lease contracts outstanding (mil. $) 8, , , , , , Avg. dollar amount of leases outstanding (mil. $) 7, , , , , , No. of contracts outstanding 398, , , , , , plus-day delinquencies (%)(i) No. of repossessions (%)(ii) Net losses (%)(iii) (i)as a percentage of the number of contracts outstanding. (ii)as a percentage of the average number of lease contracts outstanding. (iii)as a percentage of the average dollar amount of leases outstanding. Across other issuers, we have observed significant portfolio growth as leasing has increased in popularity. Some have experienced increased delinquencies, while others have seen decreased delinquencies, coupled generally with flat or higher net losses. Securitization/Surveillance Performance We maintain current ratings on seven active Hyundai Auto Lease Securitization Trust transactions that closed between 2015 and 2017 (see table 6 and chart 3). Each transaction remains adequately enhanced at this time. We will continue to monitor their performance to determine if the assigned ratings are sufficient and if any rating actions are deemed appropriate. FEBRUARY 15,

10 Chart 2 Table 6 Performance Data For Outstanding Hyundai Auto Lease Securitization Trust Transactions As Of The January 2018 Distribution Date Transaction/series Month Pool factor (%) Credit CNL(%) Initial expected lifetime credit CNL (%) Revised expected lifetime credit CNL (%)(i) Cumulative net residual losses/(gains) as a % of aggregate initial securitization value 2015-B Up to 0.60 (0.32) 2016-A (0.50) 2016-B N/A (0.34) 2016-C N/A (0.03) 2017-A N/A (0.03) 2017-B N/A C N/A 0.00 (i)revised as of January CNL--Cumulative net loss. N/A--Not applicable. FEBRUARY 15,

11 Chart 3 In terms of residual performance, the paid-off securitizations experienced residual gains as a percentage of the initial securitization value, and the outstanding series are generally reporting residual gains on the outstanding series pools (see chart 4). FEBRUARY 15,

12 Chart 4 Collateral Analysis The HALST 2018-A securitized pool comprises 57,131 prime auto lease receivables (see table 7). Hyundai and Kia vehicles each account for approximately 50% of the pool's securitization value. The top five models (Sorento, Elantra, Optima, Santa Fe, and Tucson) account for 62.2% of the securitization value, with the remaining 37.8% of the pool comprising 15 other Hyundai or Kia models. The pool consists primarily of leases with 36-month original terms (68.5%) and 48-month original terms (26.3%). Cars and crossover vehicles accounted for almost all of the pool. The pool's average FICO score is 746, and approximately 42% of the obligors in the securitized pool have FICO scores of 750 and higher. All percentages in table 7 are expressed as a percentage of the securitization value. Table 7 HALST Original Pool Characteristics 2018-A 2017-C 2017-B 2017-A 2016-C 2016-B No. of leases 57,131 54,650 56,419 62,371 61,537 45,713 MSRP ($) 1,543,594,780 1,471,435,620 1,556,712,115 1,747,728,807 1,723,121,494 1,273,327,637 Original book value ($)(i) 1,407,041,211 1,375,897,594 1,449,743,923 1,639,640,394 1,611,579,437 1,181,812,645 FEBRUARY 15,

13 Table 7 HALST Original Pool Characteristics (cont.) Original aggregate securitization value ($) 2018-A 2017-C 2017-B 2017-A 2016-C 2016-B 1,033,368,258 1,017,871,804 1,117,582,350 1,272,141,426 1,251,050, ,430,761 Avg. securitization value ($) 18,088 18,625 19,809 20,396 20,330 19,676 Securitization (discount) rate (%) Base residual value (undiscounted) ($) ,257, ,245, ,124, ,295, ,705, ,731,999 Avg. base residual value ($) 11,574 12,209 13,207 13,424 13,061 13,032 Base residual as a % of the aggregate securitization value Base residual as a % of the MSRP Weighted avg. original term (mos.)(ii) Weighted avg. remaining term (mos.)(ii) Weighted avg. seasoning (mos.)(ii)(iii) Original term (%) months months months months Weighted avg. FICO score(iv) New vehicles (%) Hyundai vehicles (%) Kia vehicles (%) Top five vehicles by model (% of securitization value) Elantra=13.25 Sorento=14.49 Sorento=15.86 Sorento=15.26 Sonata=18.07 Sonata=18.98 Sorento=13.08 Elantra=13.56 Optima=12.97 Sonata=14.13 Optima=15.76 Optima=16.98 Santa Fe=12.57 Optima=12.84 Sonata=12.48 Optima=13.46 Sorento=15.31 Sorento=14.64 Tucson=12.23 Santa Fe=11.56 Elantra=11.40 Elantra=9.80 Elantra=9.42 Elantra=9.44 Optima=11.10 Tucson=11.23 Santa Fe=10.38 Santa Fe=9.19 Santa Fe=8.15 Santa Fe=8.45 Total Vehicle type (%) Car(v) CUV/SUV Minivan/wagon(vi) Top four state concentrations (%) CA=16.18 CA=17.14 FL=15.56 CA=16.21 CA=16.17 CA=15.64 FL=15.56 NY=13.04 NY=13.87 FL=15.65 FL=15.94 FL=15.20 NY=12.34 NJ=9.95 CA=13.73 NY=12.14 NY=11.68 NY= FEBRUARY 15,

14 Table 7 HALST Original Pool Characteristics (cont.) 2018-A 2017-C 2017-B 2017-A 2016-C 2016-B NJ=8.64 FL=7.65 NJ=9.40 NJ=8.16 NJ=8.48 NJ=8.85 (i)the original book value is determined based on the leases' capitalized amounts minus the related leased vehicles' accumulated depreciation. (ii)average weighted by the securitization value. (iii)seasoning refers to the number of months elapsed since the leases' origination. (iv)fico scores are calculated excluding accounts for which no FICO score is available (approximately 0.43% of the series 2018-A pool as a percentage of the securitization value). (v)car includes Accent, Azera, Cadenza, Elantra, Equus, Forte, Ioniq, K900, Optima, Rio, Sonata, Veloster. (vi)this includes the Soul (approximately 3.80% of the series 2018-A pool as a percentage of the securitization value), which is classified by ALG as a compact multi-purpose vehicle. HALST--Hyundai Auto Lease Securitization Trust. MSRP--Manufacturer's suggested retail price. Collateral Residual Timing The leases in the HALST 2018-A pool are scheduled to mature as follows (all percentages are expressed as a percentage of the pool's aggregate undiscounted base residual value): 27.73% in 2019; 54.32% in 2020; and 17.95% in Leases will mature each month beginning in February 2019 (see chart 5). The highest base residual maturity level in any one month is 6.17%, which occurs in July The second highest is 6.07% in October The highest percentage of base residual maturities in any three-month period is 17.52%, which we expect to occur from June 2020 through August The majority of the residuals mature two or three years after the closing date. If vehicle values remain distressed in 2019 and 2020, there is increased risk that the realized residual values will be lower than the base residuals. We believe this back-end risk is mitigated by the transaction's sequential payment structure, in which the overcollateralization and reserve account target amounts will not amortize until all of the notes are paid in full, with the exception of the 100-basis-point overcollateralization release after class A-2 is paid in full. In the transaction's zero loss, zero prepay cash flow scenario, approximately 83% of the residuals will have come due by the time the notes are paid in full. FEBRUARY 15,

15 Chart 5 S&P Global Ratings' Expected Credit And Residual Losses HALST 2018-A has two principal risk components: credit and residual risk. Credit risk The obligor's credit profile determines the credit risk. To derive the base-case credit loss for the series 2018-A transaction, we projected the static pool losses on HCA's lease portfolio originations segmented by FICO score and lease term. We then weighted the projections by the actual concentration of those various segments in the series 2018-A pool. We also considered the HALST 2018-A pool's collateral credit quality, Hyundai's overall managed pool performance, the performance of outstanding HALST securitizations, and our forward-looking view of the economy. Based on this information, we expect the HALST 2018-A pool's cumulative net credit loss to be 1.15% of the pool's securitization value. Residual risk We examined and assessed residual loss on the series 2018-A pool according to our auto lease criteria, "Revised General Methodology and Assumptions for Rating U.S. ABS Auto Lease Securitizations," published Nov. 29, FEBRUARY 15,

16 In our analysis of the series 2018-A pool's residual risk, we considered the following factors: The historical stability of Hyundai's and Kia's used-vehicle values; The consistency of the ALG's historical forecasts in relation to the actual historical used-vehicle values; The basis for the differences between the actual values and the forecasts; The ALG's basis for their current forecast; Brand perception; HCA's plans (if any) to discontinue or update the vehicle models in question in the near term; and The economy. Based on these factors, we did not apply any adjustment to the base residual value. Base haircut According to our auto lease criteria, we first applied initial 26.00% and 23.00% rating-specific haircuts to the series 2018-A pool's base residual value; this is commensurate with 'AAA' and 'AA+' rating scenarios, respectively. Excess concentration haircut In addition to the aforementioned base haircut, we applied a haircut to the amount of nondefaulted lease residuals exceeding the concentration limits applicable to the benchmark pool (excess concentrations) as outlined in our auto lease criteria. The haircut applied to excess concentrations commensurate with each rating scenario is shown in table 8. Table 8 Additional Excess Concentration Haircut Scenario (preliminary rating) AAA (sf) AA+ (sf) Haircut applied to the excess concentration as a % of undiscounted base residual value The excess 3.71% concentration results in additional 'AAA' and 'AA+' base residual value haircuts of 0.48% and 0.43%, respectively, bringing the total base residual value haircuts applied to the series 2018-A pool to 26.48% and 23.43% at the 'AAA' and 'AA+' levels, respectively (see table 9). Table 9 Benchmark Pool Excess Concentrations HALST 2018-A Benchmark pool concentration limit Excess concentration One-month maturity in excess of benchmark (% of undiscounted base residual) March June July August October Individual model (Elantra) (%) Full-size and mid-size SUVs, full-size pickups, and vans (%) Compact and hybrid cars (%) New and discontinued models (%) FEBRUARY 15,

17 Table 9 Benchmark Pool Excess Concentrations (cont.) HALST 2018-A Benchmark pool concentration limit Excess concentration Total excess concentration (%) HALST--Hyundai Auto Lease Securitization Trust. Speculative-grade manufacturer haircut When determining the stress that applies to the adjusted base residual value, we use the auto manufacturer's creditworthiness. Our auto lease criteria apply haircuts to the base residual value of the vehicles produced by manufacturers with speculative-grade corporate credit ratings (i.e., 'BB+' or below). Hyundai and Kia manufacture the leased vehicles backing the HALST 2018-A pool. On Jan. 29, 2015, we raised our long-term corporate credit rating on each company to 'A-' from 'BBB+' because of their strong credit metrics and improved financial risk profiles. We also raised our long-term corporate credit rating on HCA to 'A-' from 'BBB+'. In September 2017, we revised the outlook to negative from stable due to the company's weakening sales and profitability, among other factors. Based on the corporate credit ratings on Hyundai, Kia, and HCA, we did not apply a speculative-grade manufacturer haircut to the series 2018-A transaction. Low diversification haircut For pools with low diversification, as described in our auto lease criteria, we apply a low diversification haircut in addition to the aforementioned haircuts. Our auto lease criteria describe the six conditions for which, if met by the securitized lease pool, we would apply this type of haircut. These conditions are: More than 20% of the residuals mature in any one month. More than 50% of the residuals mature in any three months. The pool contains three or fewer individual models. The pool contains more than 75% of full-size and mid-size SUVs, full-size pickup trucks, and full-size vans combined. The pool contains more than 75% of compact and hybrid cars combined. The pool contains more than 20% of new and discontinued models combined. The HALST 2018-A pool does not meet any of these six conditions, so we did not apply the low diversification haircut. Total stressed residual losses After analyzing the HALST 2018-A lease pool, applying the relevant residual value haircuts, and assessing stressed return rates of % and 97.50% at the 'AAA' and 'AA+' rating levels, respectively (representing the loss frequency on nondefaulted leased vehicles of 88.50% and 89.65%, respectively), our stressed residual loss under each rating scenario is shown in table 10. Table 10 Stressed Residual Loss Scenario (preliminary rating) AAA (sf) AA+ (sf) Residual haircut as a % of undiscounted base residual FEBRUARY 15,

18 Table 10 Stressed Residual Loss (cont.) Scenario (preliminary rating) AAA (sf) AA+ (sf) Additional excess concentration haircut (%)(i) Total residual haircut as a % of base residual value Total residual haircut as a % of securitization value (i)the excess concentration haircuts are derived by multiplying the total excess concentration calculated in table 9 by each of the rating category haircuts shown in table 8. Cash Flow Modeling We tested HALST 2018-A's proposed structure using cash flow scenarios to determine if the credit enhancement levels were sufficient to pay timely interest and principal in full by the notes' legal final maturity dates under our 'AAA' and 'AA+' stress scenarios. We modeled the transaction to simulate stress scenarios commensurate with the ratings to determine if the credit enhancement levels were sufficient to pay timely interest and principal in full by the notes' legal final maturity dates. We assumed a 100% turn-in rate on the nondefaulting leases (88.50%) at the 'AAA' rating level and a 97.50% turn-in rate on the nondefaulting leases (89.65%) at the 'AA+' rating level, together with no prepayments. The cash flow results demonstrate that the preliminary rated notes are enhanced to the degree necessary to withstand a level of stressed credit and residual losses that is consistent with the assigned preliminary ratings. The class A notes can withstand a cumulative net credit loss of 5.75% of the securitization value and residual losses equal to 15.00% of the securitization value on 100% of the nondefaulting leases that reach their lease maturity. The class B notes can withstand a cumulative net credit loss of 5.18% of the securitization value and residual losses equal to 13.10% of the securitization value on 97.50% of the nondefaulting leases that reach their lease maturity (see table 11). Table 11 Cash Flow Assumptions And Results Class A B Scenario (rating) AAA AA+ Cumulative net loss percent (%) Cumulative net loss timing (mos.) 12/24/36 12/24/36 Cumulative net loss (%) 40/80/100 40/80/100 Voluntary prepayments (%) Recoveries (%) Recovery lag (mos.) 4 4 Residual haircut (%) Total residual haircut as a percentage of the undiscounted base residual value Total residual haircut as a percentage of the securitization value Vehicle return rate (%) Residual realization lag (mos.) 2 2 S&P Global Ratings' stressed credit and residual loss as a percentage of the securitization value (%) FEBRUARY 15,

19 Table 11 Cash Flow Assumptions And Results (cont.) Result (%) Approximate credit enhancement in the transaction based on S&P Global Ratings' credit stress and break-even residual stress as a percentage of the securitization value (%) Sensitivity Analysis In addition to running stressed cash flows to analyze the amount of credit and residual losses the transaction can withstand, we ran a sensitivity analysis to determine how credit and residual losses that are in line with a moderate ('BBB') stress scenario could affect our ratings on the notes. According to our ratings stability criteria, we will not assign a preliminary 'AAA (sf)' or 'AA+ (sf)' rating if we believe that the rating would decline more than one rating category in the first year during a moderate stress scenario. We will also not assign a preliminary 'AAA (sf)' or 'AA+ (sf)' rating if we anticipate that the rating would decline by more than three rating categories in a three-year horizon under moderate stress conditions. In our view, under the 'BBB' moderate stress scenario, all else being equal, we expect our rating on the class A notes to remain at 'AAA (sf)'. We expect our rating on the class B notes to remain within one rating category of the assigned 'AA+ (sf)' preliminary rating (see chart 6). FEBRUARY 15,

20 Chart 6 Money Market Tranche Sizing The proposed money market tranche (the class A-1 notes) has a 13-month legal final maturity date (March 15, 2019). To test whether the money market tranche can be repaid by month 13, we ran cash flows using assumptions to delay the principal collections during the 13-month period. In our cash flow run, we assumed zero defaults and a zero absolute prepayment speed on all leases. We also stressed the recognition of the monthly lease payments and base residual amounts by applying a lag of one and two months, respectively. Based on our cash flow runs, 10 months of collections would be sufficient to pay off the money market tranche. Legal Final Maturity To test the legal final maturity dates set for the longer-dated tranches (classes A-2 through A-4), we determined when the respective notes would be fully amortized in a zero-loss, zero-prepayment scenario and then added six months to the result. We also looked to see when these notes would pay off in our stressed cash flow scenarios. In our cash flows for the longest-dated security (class B), we added seven months to the tenor of the last-maturing receivable in the pool FEBRUARY 15,

21 to accommodate extensions and residual realization on the receivables. In all of our cash flow scenarios, we confirmed that there is sufficient credit enhancement both to cover losses and to repay the related notes in full by their legal final maturity dates. HCA HCA (A-/Negative/A-2) is an 80%-owned subsidiary of Hyundai Motor America, which, in turn, is a wholly owned subsidiary of South Korea-based automaker Hyundai Motor Co. (A-/Negative/--). The remaining 20% is owned by Kia Motors America Inc., an affiliate of HCA and a wholly owned subsidiary of Kia Motors Corp. (A-/Negative/--). HCA offers both retail and lease products to its customers. HCA is a full-service auto finance company that provides services to Hyundai dealers across the country and arranges financing for facilities refurbishment, real estate purchases, construction, working capital requirements, and dealer inventory. Related Criteria General Criteria: Methodology For Linking Long-Term And Short-Term Ratings, April 7, 2017 Criteria - Structured Finance - General: Ratings Above The Sovereign - Structured Finance: Methodology And Assumptions, Aug. 8, 2016 Criteria - Structured Finance - General: Methodology: Criteria For Global Structured Finance Transactions Subject To A Change In Payment Priorities Or Sale Of Collateral Upon A Nonmonetary EOD, March 2, 2015 Criteria - Structured Finance - General: Criteria Methodology Applied To Fees, Expenses, And Indemnifications, July 12, 2012 General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012 Criteria - Structured Finance - RMBS: U.S. Interest Rate Assumptions Revised For May 2012 And Thereafter, April 30, 2012 Criteria - Structured Finance - ABS: Revised General Methodology And Assumptions For Rating U.S. ABS Auto Lease Securitizations, Nov. 29, 2011 Criteria - Structured Finance - ABS: General Methodology And Assumptions For Rating U.S. Auto Loan Securitizations, Jan. 11, 2011 Criteria - Structured Finance - General: Standard & Poor's Revises Criteria Methodology For Servicer Risk Assessment, May 28, 2009 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Special-Purpose Entities, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Appendix III: Revised UCC Article 9 Criteria, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Criteria Related To Asset-Backed Securities, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Securitizations By Code Transferors, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Select Issues Criteria, Oct. 1, 2006 Criteria - Structured Finance - ABS: Assessing the Risk of Pension Plan Terminations on U.S. Auto Lease Securitizations, Aug. 17, FEBRUARY 15,

22 Related Research Two Ratings Raised And Three Ratings Affirmed On Two Hyundai Auto Lease Securitization Trust Deals, Jan. 22, 2018 Hyundai Capital America, Jan. 2, 2018 Hyundai Motor, Kia Motors, And Hyundai Mobis Outlooks Revised To Negative; 'A-' Ratings Affirmed, Sept. 8, 2017 Hyundai Capital America Outlook Revised To Negative On Weakening Profitability At Hyundai Motor; 'A-' Rating Affirmed, Sept. 8, 2017 Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016 In addition to the criteria specific to this type of security (listed above), the following criteria articles, which are generally applicable to all ratings, may have affected this rating action: "Post-Default Ratings Methodology: When Does Standard & Poor's Raise A Rating From 'D' Or 'SD'?," March 23, 2015; "Global Framework For Assessing Operational Risk In Structured Finance Transactions," Oct. 9, 2014; "Methodology: Timeliness of Payments: Grace Periods, Guarantees, And Use of 'D' And 'SD' Ratings," Oct. 24, 2013; "Counterparty Risk Framework Methodology And Assumptions," June 25, 2013; "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," Oct. 1, 2012; "Methodology: Credit Stability Criteria," May 3, 2010; and "Use of CreditWatch And Outlooks," Sept. 14, Analytical Team Primary Credit Analyst: Jennie P Lam, New York (1) ; jennie.lam@spglobal.com Secondary Contact: Ethan Choi, New York (1) ; ethan.choi@spglobal.com FEBRUARY 15,

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