Santander Bank Auto Credit Linked Notes, 2022-C, is planning to issue some $2 billion in credit-linked notes, secured by loans on new and used automobiles, light duty trucks, sport utility vehicles and vans.
The transaction is the third one for the year, and one where a secured-cash collateral account helped secure the principal payments to the notes, according to Moody's Investors Service. Principal payments will come from cash proceeds of the initial sale of the notes, and those proceeds will be held in a collateral account with a depository institution rated at least A2 of P-1.
Also called SBCLN 2022-C, the deal also differs from other bank-sponsored, credit-linked note transactions in that the rating agency will not limit the notes' ratings to SBNA's long-term counterparty risk rating, which is Baa1, according to Moody's. Should the SBNA default on its payment obligations, the transaction would unwind and the cash collateral would be used to make the final payments owed to the noteholders.
Santander Bank, N.A. (SBNA), which originated the notes, is sponsoring the deal, while Santander Consumer USA will service the reference obligations.
A number of credit strengths support the repayment of SBCLN 2022-C's notes, including the collateral pool's high credit quality. On a weighted average (WA), the borrowers on the underlying loans have a FICO score of 772, an original term of 70 months and a loan-to-value ratio of 98%, the rating agency said.
Moody's set its loss expectation at 2.0%, based on the collateral pool's credit quality.
J.P. Morgan and Amherst Pierpoint are the lead underwriter on the deal, which will repay the notes through a modified pro rata structure. Principal payments are allocated to classes A through class E notes, based on the respective senior and subordinate percentages, Moody's said.
Moody's intends to assign ratings of 'Aaa' to the $10 million, A-2 notes; 'Aa2' on the $77 million notes; and other ratings of 'A2' on the $34 million on the class C notes through 'B2' on the $29 million, class F notes.
Moody's does not expect to assign ratings to the $1.7 billion A-1 notes.
