In the week that the Federal Reserve
According to ratings agency presale reports, Santander plans up to a $2.2 billion note issuance secured by a pool of nonprime new and used vehicle loans issued both directly and indirectly to subprime borrowers.
The $2.2 billion notes offering through Santander Drive Auto Receivables Trust (SDART) 2021-1 would be backed by a loan pool of with $2.43 billion of outstanding balances. Santander is also proposing a smaller pool – depending on investor demand – of $1.55 billion in bonds secured by loans totaling about $1.82 billion, according to Fitch Ratings and Moody’s Investors Service.
Each of the SDART 2021-1 pools carries two tranches of triple-A rated senior notes, and three subordinate note offerings. The notes benefit from overcollateralization and other credit enhancement support totaling 51.7%.That is slightly lower than Santander’s prior deal.
The pools are backed by collateral that is consistent with the credit quality of Santander’s deals between 2017 and 2020, Fitch stated in a report. The weighted average borrower FICO is 612.
New vehicles make up about 36.6% of each pool (in line with Santander’s previous SDART 2020-4 shelf), and extended term loans over 61-months account for 92.2% of the pool balance. Santander limited the total share of loans over 72 months to 14.8% of the pool, compared to 15.3% in the prior deal.
Fitch has base-case credit-net loss proxy of 17.5%, a slight decline from 18% in SDART 2020-4. Moody’s net loss expectation is 18%.
The issuance is being launched shortly after the Federal Reserve t
Santander Consumer USA is the $64 billion-asset affiliate of Boston-based Santander Holdings USA, the U.S. arm of Spanish banking giant Banco Santander. Since March 2017, the holding company had been under Fed orders to strengthen oversight of its Dallas-based auto lending unit.
Those deficiencies included the lender’s management and board oversight of compliance risk management policies. Santander has “made significant progress in strengthening board oversight, compliance, risk management, capital planning and liquidity risk management” since 2015, the company said Thursday.
Last May, Santander Consumer also reached an agreement with a group of state attorneys general in which it paid $65 million in restitution and forgave nearly $500 million in car loan debt.
