Santander Bank is preparing to sponsor its first securitization this year of revenues from a collateral pool of loans on new and used automobiles, heavy-duty trucks, light-duty trucks, SUVs and vans, raising $2 billion.
The deal, Santander Bank Auto Credit-Linked Notes, 2025-A, will sell the debt through about nine tranches of notes, classes A through R, according to Moody's Ratings. All the notes have a legal final maturity date of Jan. 16, 2034.
Notes benefit from subordination as their main form of credit enhancement, the rating agency said. Levels for that credit boost include 13.45% on the class A notes; 12.95% on the Aaa-rated A2 notes; and 11.50% on the Aa3-rated class B notes.
Also, Moody's assigns A2, Baa3, Ba3 and B3 to classes C, D, E and F, respectively. Moody's did not rate the A1 tranche, which contains the bulk of outstanding notes in the deal, $1.7 billion, which represents 86.5% of the notes' outstanding balance.
J.P. Morgan Securities, Santander U.S. Capital Markets and
Santander Bank originated the reference pool and will service the loans, according to Moody's. The bank's successful record of servicing loans and securitizing the assets over 20 deals also helps strengthen the credit to the notes, Moody's said.
Through subordination, the senior notes will build hard credit enhancement levels over time, because classes B through G will be locked out of principal payments for eight months, Moody's said.
The source of principal payments to SBCLN 2025-A will be the initial sale of notes, the proceeds of which will be held in a collateral account with a highly rated third-party bank. That institution will be rated at least Moody's-rate A2 or P1. Also, the transactions benefit from a letter of credit from an A1 or P1-rated institution. Should SBNA default on its interest obligations, or in the case of other extreme distress, the letter of credit is sized to cover up to five months of missed interest payments, the rating agency said.
Despite all the credit boosts, SBCLN 2025-A will repay investors through its modified pro-rata structure. Ultimately, this can leave the senior bonds open tail risk when the deal might not have all subordinate notes to absorb losses because principal on the notes will be reduced.
Moody's also cautions that current tariff policies might pose economic challenges for consumers, and the underlying pool is slightly weaker compared with the SBCLN 2024-B.
