Santander Consumer USA is sponsoring a $1.4 billion securitization of mainly non-prime retail auto loan contracts, in a deal through the Santander Drive Auto Receivables Trust 2023-1.
Wells Fargo Securities is the lead underwriter on the transaction, which is the latest in more than 70 transaction across six platforms that issue securitized debt for Santander, according to a pre-sale report from Moody's Investor Service.
Moody's points to several key credit strengths about the deal, including Santander Consumer's deep experience in the sector. The company has a non-prime serviced portfolio of about $30 billion, as of Sept. 30, 2022. In its capacity as the transaction's servicer, Santander Consumer makes a representation that each loan in the collateral pool will make at least two payments, and if any loan fails to do that it will ensure that loan is purchased out of the trust.
In another sign of potential strength, Moody's notes that the pool will accumulate enhancement as the notes amortize. Initially, the notes have 25.50% of over-collateralization (OC) of the initial pool balance, and that is expected to build to a target OC level of 35.00% of the outstanding pool, plus 2.00% of the initial pool balance.
Perhaps those representations and OC levels are warranted, however. The SDART 2023-1 has a weighted average (WA) FICO of 602, which is generally in line with earlier SDART deals. Overall, Moody's added, performances in 2022 SDART transactions and recent managed portfolio vintages had been weakening. Inflationary pressures, including higher prices for gas and for borrowing, plus the fact that stimulus programs had begin to dry up in 2021, contributed to that, the rating agency said.
Moody's expects to assign ratings of P-1 to the class A1 notes; 'Aaa' to the classes A2 through A3 notes, and 'Aa1' on the class C notes. They have legal final maturity dates ranging from Feb. 15, 2024 through May 15, 2030, the rating agency said.
