Santander Consumer’s UK operation is securitizing its first batch of British auto loan originations in over 18 months.
Motor 2016-1 PLC is a pooling of 95,077 standard UK consumer conditional sale agreements with a total principal balance of £647.5 million, structured in a six-class bond structure that includes ‘AAA’-rated senior notes, according to a presale report from Standard & Poor’s. The tranche sizes of the notes are to be determined.
Motor 2016-1 is Santander Consumer UK’s first auto securitization on the Motor platform since March 2015, and the fourth overall rated by S&P. (A joint venture special-purpose entity involving Santander and French automaker PSA Peugeot Citro'n issued £1.31 billion notes in April securitizing loans and contract purchase agreements for new and used vehicles from UK Peugeot and Citro'n dealers).
The fixed-rate Class A and B series notes will have 12% available credit enhancement, and the B notes at 9.5%. The enhancement does not include a reserve fund that is equal to 1.55% of the total notes balance, which will be used to provide liquidity support to rated notes.
The Motor 2016-1 transaction includes a 24-month replenishment period that will allow the special-purpose entity issuing the notes to add more loans to the pool. The loans in the initial pool were originated for primarily used Vauxhall, Volvo and Ford vehicles (only 12.5% of the pool is for new vehicle loans).
This transaction, unlike the prior Motor 2015-1 deal, includes no personal loans and personal contract purchase (PCP) agreements, which carry greater residual risk from post-lease vehicle returns. Contract-sale loans also have a voluntary termination option for borrowers, but only after the owner has paid off 50% of the original principal balance.
That option generally is only utilized by borrowers still under water on a vehicle contract, but historically have not proven to be a high risk for UK auto asset-backed deals (S&P assumed only a 2% voluntary termination rate for the pool; the typical recovery range prospects in a UK ABS deal are 30-45%).
