Santander Drive Auto Receivables Trust (SDART) is preparing to issue $1.4 billion in asset-backed securities (ABS), with the ability to upsize the deal to $1.9 billion.
The transaction will issue notes through six tranches, according to Moody's Ratings. Pricing guidance was not available on the most senior notes, to which Moody's and Fitch Ratings have assigned P1 and F1+, respectively.
The three-month interpolated yield curve is the common benchmark for all the notes, according to Asset Securitization Report's deal database. Yields were expected to range from 5.4% on the AAA notes to 5.3% on the Baa3 (Moody's).
Société Générale Americas Securities,
Santander Consumer, the lender and sponsor of the deal, has sponsored three previous deals from the SDART program this year and more than 100 transactions across six platforms, Moody's said. That track record as sponsor and servicer is one of the transaction's key credit attributes, the rating agency said.
Further, Santander Consumer makes strong representations, as servicer, that each loan in the collateral pool will make at least two payments since origination, or it will be repurchased out of the trust.
Total initial credit enhancement includes over-collateralization representing 8.95% of the initial pool balance, which is expected to build to a targeted level of 13.95% of the outstanding balance, plus 2.0% of the initial pool balance, with a floor of 2.0% of the initial pool balance.
Yet the transaction has some credit challenges. For one, the 64,438 loans are extended to non-prime quality borrowers buying used vehicles. Used vehicle loans account for 71% of the pool, Moody's said. On a weighted average (WA) basis, the loans have a FICO score of 604, a loan-to-value ratio of 109%, and an annual percentage rate of 18.5%.
Moody's assigns Aaa to the A2 through B tranches; Aa3 to the class C notes; and Baa3 to the class D notes.
Fitch Ratings assigns AAA to classes A2 and A3; AA to the class B notes and A to the class C notes.
