Auto ABS

Aside from overcollateralization and subordination, the notes get support from a reserve account representing 0.96% of the pool and an incremental reserve account maintain 1.00%.

Series 2024-2 can be upsized to $1.5 billion from the base pool amount, but regardless of the increase, pricing guidance, total credit enhancements and legal final maturities are expected to remain the same.

Pricing ranges between 20 basis points, over the three-month Interpolated yield curve, on the A1 notes to 400 bps over the class E, at almost par, between 99.98% and 99.99%.

There are two series, 2024-1 and 2024-2, that have revolving periods—three for the 2024-1 and five for the 2024-2—during which noteholders will not receive any principal.

The trust employs a 24-month revolving period. There is an increased risk that collateral quality could deteriorate as the transaction evolves with new collateral.

Four tranches of class A notes make up the capital structure, and they all benefit from 3.00% in total initial hard credit enhancement.

Raising $344 million, the deal securitizes revenues from loans with lower balances and a higher weighted average loan-to-value ratio compared with the previous deal.

Used car loans support the notes, where the two class A tranches benefit from 59.90% in total credit enhancements, while classes B, C, D and E have 51.88%, 42.54%, 33.23%, and 26.96% respectively.

The underlying loans have 8.32 months in seasoning, which is higher than the amount seen on Arivo Acceptance securitizations going back to the series 2021-1 deal.

Revenue from auto dealer floorplan receivables will secure $920.2 million in class A notes from the Nissan Master Owner Trust Receivables, both series 2024-A and 2024-B, according to Moody's Investors Service.

FCAOT, in its first issuance of the year, could upsize the deal to $1.5 billion

Prime quality auto loans secure the pool, although recent rapid origination growth put some strain on and deterioration on the notes in the 2022 and 2023.

Spreads are expected to come in ranging from 15 basis points over the 3M I-Curve on the A1 notes to 160 bps over the benchmark on the class D notes.

Initial overcollateralization is 11.3%, up from 8.50% of the initial collateral pool balance. Aside from that adjustment, target overcollateralization is 22.45%, compared to 13.00% on Westlake 2023-4 deal.

Although the notes are supported by non-prime assets, Banco Santander sits at the top of the transaction's ownership chain and has a stable long-term, senior unsecured debt rating of A2.

HBAN will service the transaction, with an A3 rating for long-term, senior unsecured debt, an A2 long-term credit assessment, and P-1 for short-term deposits.

The notes benefit from total hard target credit enhancement of 16.50%, with an estimated 4.02% in estimated excess spread per year.

Like a growing number of auto ABS deals, the pool has more battery electric vehicles, which represent 10.6% of the pool, compared with 3.8% on the previous deal, FCAOT REV 2023-1.

In the current pool, some 77.4% for all three pools are composed of tier A loans. This is slightly higher than the concentrations of tier A loans seen in several previous deals.

Issuance has been scant since DRIVE 2021-3 closed in November 2021. A lack of comparison deals from recent years makes it more difficult to forecast losses.