Santander Consumer USA priced the senior notes from its fifth subprime auto loan securitization of the year several basis points tighter than its previous deal, according to a pricing document.

The one-year, fixed-rate and floating-rate senior bonds priced at a spread of 40 basis points over the Eurodollar synthetic forward curve (EDSF) and 40 basis points over the one-month Libor, respectively; that's 8 basis points wider than the equivalent tranches of the issuer's September transaction.

The two-year bond issued from series 2014-5 priced 12 basis points wider than the last print, at 47 basis points over EDSF.

Citigroup Global Markets is the lead underwriter.

Santander’s last two deals have included increasingly weaker credit charecteristics. For example, 2014-5 has higher concentration of loans with longer terms. Those with terms of 60+ months rose to 93.9%, which is the highest to date, driven by a notable increase in 73−75 month loans, totaling 15% of the collateral.  

In Santander’s previous deal, 201404, 89.82% of the loans had terms of 61-75 months, and that was up from 84.4% in a deal completed in June.

Longer term loans are considered riskier because they amortize more slowly. And since automobiles lose value as soon as consumers pull out of a dealership’s parking lot, the longer the loan, the more time the borrower spends “underwater,” with more debt than equity in the car, and the greater the risk of losses to the lender in the event of default.


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