Santander Consumer is planning to sponsor a securitization deal collateralized by mainly non-prime retail installment loan contracts, a deal that will come to market through its Drive Auto Receivables Trust platform.
The deal, called Santander Drive Auto Receivables Trust, 2022-6, will issue either a base amount of $1.2 billion, or an upsized $2.0 billion in notes, according to Moody's Investors Service.
Should the trust issue $1.2 billion in notes, the collateral pool would contain loan revenue from 47,676 contracts; and if it issues $2.0 billion in notes, some 75,962 contracts will secure the notes.
Other aspects of the deal, however, will remain the same. On a weighted average (WA) basis, the loans have:
· A Santander Consumer loan funded score of 536
· Loan-to-value ratio of 105%
· Annual percentage rate of about 15.1%
· Original term of 71 months
· Remaining term of 69 months
Regardless of the total securitized portfolio amount, Moody's noted, the ratio of new versus used underlying vehicles is 24% and 76%.
RBC Capital Markets, Amherst Pierpont, and BMO Capital Markets are lead underwriters on the deal, according to Moody's. The deal structures benefit from about 31.40% of subordination.
The notes also benefit from a couple of other forms of credit enhancements. When the deal closes, the class A notes include an initial over-collateralization of 12.8%, with the expectation that OC will build to a target level of 22.8% of the outstanding pool balance, plus 1.5% of the initial pool balance, according to Moody's. Lastly, non-declining reserve fund of 1.00% of the initial pool balance.
Yet the rating agency noted some key concerns about the transaction. For one, borrowers in the pool are non-prime. The base and upsize pool have WA FICO scores of 601 and 600, respectively.
The collateral is diversified geographically, Moody's noted. Texas accounts for the largest portion, at 18%. Florida, California, Georgia and New York round out the top five states, with 13%, 8%, 4%, and 4%, respectively.
Moody's expects to assign a P-1 rating to the $146 million, A1 notes; 'Aaa' on the A2 through B notes; 'Aa2' on the C notes and 'Baa2' on the D notes, the rating agency said.
