Santander Markets Another $1.45B Equivalent of Spanish RMBS

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Santander is marketing €1.33 billion ($1.45 billion) of notes backed by a portfolio of Spanish residential mortgages.

The portfolio backing the transaction, FT RMBS Santander 5, totals €1.36 billion of Spanish mortgages, most of which have previously been in arrears. In June the Spanish bank sold €3.09 billion of notes backed by a pool of high LTV Spanish loans under the trust.

The loans in Santander 5's collateral pool are not as levered. According to Moody's the weighted average LTV of pool is 72.23% compared to an LTV of 103% for the previous deal; 32.97% of loans are above 80% LTV and 19.24% of loans above 90% LTV.

However, the collateral pool's weighted average LTV is based on valuation at origination. Moody's said based on current property revaluations, the WA LTV rises to 105.4%.

Moody's plans to assign an 'A2' rating to the series A notes, which benefit from 20.5% subordination.

At the subordinate level the trust will issue 'Caa1' rated class B notes and 'Ca' rated class C notes. The notes mature on October 2065.

Loans in the pool have a remaining term of 25.27 years; the pool is seasoned 6.28 years and the majority (99.7%) of the loans are floating rate and indexed to 12 months Euribor.

Santander is the largest banking group in Spain and among the 15 largest banking groups in Europe. Retail banking (including asset management and insurance), which accounts for around 75% of profits, is Santander’s main source of earnings, a factor that has underpinned its solid performance during the global financial crisis. Nevertheless these profits tend to be more vulnerable to event risk, despite their retail nature. Moody's noted that the bank is also facing very challenging operating conditions, which will continue to translate into higher credit costs (namely in Spain and Portugal), low business growth and costly access to market funds.

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