Santander Consumer USA is proposing what might be its largest-ever securitization of subprime auto loan originations.
Santander this week is proposing its second bond sale this year secured by a pool of vehicle loans originated and serviced by the lender that could total either $1.6 billion or $2.14 billion in notes, depending on market conditions.
At $1.6 billion, it would be the largest transaction since Santander last year closed on a $1.86 billion transaction on its Santander Drive Auto Receivables Trust non-prime ABS platform. But at $2.14 billion, the deal would represent the largest SDART deal in the post-crisis area for the lender, a unit of Boston-based Santander Holdings USA, the U.S. banking arm of Spain’s Banco Santander, S.A.
Santander Drive Auto Receivables Trust 2021-2 will reference a pool of either $1.73 billion or $2.31 billion in outstanding auto-loan balances or $2.31 billion.
Each pool has similar credit characteristics: a weighted average borrower FICO of 611 and a preponderance of extended-term loans over 60 months (93.3% of the pool).
The transaction will feature three senior note classes plus four subordinate tranches that provide support to the 51.55% credit enhancement on the first-pay bonds. The triple-A notes include a Class A-2 tranche that will be sized at either $454.9 million or $606.68 million (each 23.23% of the respective pool assets) and a Class A-3 offering of $210.6 million in notes or $280.92 million.
A Class A-1 money market tranche totaling either $192 million or $256 million has expected short-term ratings of F1+ from Fitch Ratings and P-1 ratings from Moody’s.
The notes are secured by a collection of loans with average principal balances of $20,819 (from the smaller $1.73 billion pool), with weighted average APRs of 14.84% and loan-to-value ratios of 107.91%. The loans are seasoned an average of six months.
Fitch has a forward-looking credit loss expectation of 17.25% on the deal. S&P has cumulative net loss expectation of 16.5%, matching the projections Moody’s assigned Santander’s prior deal this year and reflecting “the steady but uneven recovery of the macroeconomy” from the coronavirus pandemic.
Since 1998, Santander Consumer has sponsored over 70 transactions, of prime and non-prime loans as well as retail auto lease loans.
