Issuers continue to push out asset-backed securities collateralized by non-prime retail installment auto loan contracts, and Santander Drive Auto Receivables Trust is preparing to add to that volume with a $1 billion offering.
Due to close by November 30, the series 2023-6 will issue bonds through five tranches, and class A, B and C notes, according to Asset Securitization Report's deal database. Pricing guidance ranges from 90 basis points over the 3M I-Curve on the A2 notes to a range of 205-215 basis points over the benchmark on the class C notes. Ultimately, yields are expected to come in at 6.15%, 6.00%, 6.06% and 6.49% on the classes A2, A3, B, and C notes, respectively.
Legal final maturity dates range from Nov. 15, 2024 on the A1 notes to March 17, 2031 on the class C notes.
Moody's Investors Service's ratings analysts say the A1 through A3 tranches benefit from total hard credit enhancement of 43.00% of the deal's initial principal balance, includes subordination and a non-declining reserve account of 1.00%. That reserve account level will remain static throughout the deal, according to Moody's. The class C notes, though, do not benefit from subordination, says Moody's analysts.
According to the rating agency, the issuer estimates that gross excess spread will be 8.25%.
Fitch Ratings notes that classes B and C benefit from 32.25% and 20.60%, respectively, in initial hard credit enhancement. Analysts there also believe that each class of notes has enough loss coverage to manage the rating agency's cumulative net loss (CNL) proxy, which it puts at 15.00%. Fitch also notes that its CNL proxy is consistent with what it had seen on the 2023-4 and 2023-5 deals, but is lower than what it had seen on the 2022-2 series of bonds.
Barclays is lead underwriter on the deal, with Mizuho Securities and Santander Investment Securities as managers, according to Fitch.
Fitch expects to assign 'F1+' to the A1 notes; 'AA' to the classes A2 and A3 notes; and 'AA' and 'A' to classes B and C, respectively. For its part, Moody's will assign 'P1' to the class A1 notes; 'Aaa' to the A2 through B tranches; and 'A1' to the class C notes.
