Santander Consumer is selling $1.6 billion in asset-backed bonds from the Drive Auto Receivables Trust, 2024-1, secured primarily by non-prime auto loans.
DRIVE 2024-1 will issue A, B and C classes of notes through five tranches, except for one segment that offers 33.10% in overcollateralization, according to a breakdown of the capital structure from Moody's Investors Services ratings analysts.
The A1, A2, A3, B and C tranches have legal final maturity dates of February 2025, December 2026, February 2028, January 2029 and November 2031, respectively. All of the class A notes benefit from total initial hard credit enhancement of 56.35%, Moody's said. The B and C tranches, meanwhile, benefit from enhancement levels of 46.30% and 34.10%, respectively. The entire structure also receives enhancement from a reserve fund representing 1.00% of the pool balance, according to analysts.
Moody's says it expects a cumulative net loss of 22.0% on the asset pool. At a Aaa stress, the loss is an expected 54.00%, and both are in line with expectations from the DRIVE 2021-3 deal, the rating agency said. One of the deal's credit strengths, according to Moody's is a buildup of enhancements as the pool amortizes. The initial overcollateralization is expected to build to 42.35% of the outstanding pool balance, plus 3.50% of the initial pool balance, and a 3.50% floor of the initial balance, ratings analysts said.
Despite these layers of protection, the collateral pool's weak credit quality counts against it, Moody's said. As of the pool's cutoff date, the loans had a non-zero weighted average (WA) FICO score of 586, 11 points higher than the DRIVE 2021-3. Further, issuance of auto ABS backed by non-prime auto loans has been scant since DRIVE 2021-3 closed in November 2021. A lack of comparison deals from recent years makes it more difficult to forecast losses, the rating agency said.
Moody's assigns a P1 rating to the A1 notes, and Aaa to the A2 and A3 notes; Aa2 to the class B notes; and Baa3 to the class C notes. Fitch expects to assign ratings of F1+ to the A1 notes; AAA to classes A2 and A3 notes; AA to the class B notes and A to the C notes.
