DBRS Ratings Limited Assigns Provisional Ratings to FTA Santander Consumer Spain Auto 2014-1

DBRS Ratings Limited (DBRS) has assigned provisional ratings to the following notes issued by FTA Santander Consumer Spain Auto 2014-1 (the Issuer or the Fund):

-- €703,000,000 Class A Notes at A (sf)
-- €27,400,000 Class B Notes at BBB (sf)
-- €15,200,000 Class C Notes BB (low) (sf)
-- €14,400,000 Class D Notes B (low) (sf)
-- €38,000,000 Class E Notes C (sf)

The Fund is a securitisation of a portfolio of auto loan receivables issued in Spain and originated by Santander Consumer E.F.C., S.A. (the Seller or the Servicer or SCF). The portfolio consists of auto loan receivables granted to private individuals and commercial entities to finance the purchase of new and used vehicles. Upon closing, the transaction will use the proceeds of Class A, Class B, Class C and Class D Notes to purchase the €760 million portfolio. The Fund will also issue the Class E Notes to fund the €38 million reserve fund. The portfolio will be serviced by SCF. The Fund is managed by Santander de Titulización, SGFT (the Management Company).

The ratings are based on review by DBRS of the following analytical considerations:

• Transaction capital structure and form and sufficiency of available credit enhancement. The Class A Notes 12.50% credit enhancement consists of subordination of the Class B, Class C, Class D Notes and the reserve fund. The Class B Notes 8.90% credit enhancement consists of subordination of the Class C, Class D Notes and the reserve fund. The Class C Notes 6.90% credit enhancement consists of subordination of the Class D Notes and the reserve fund. The Class D Notes 5.00% credit enhancement consists of subordination of the reserve fund. The Fund will issue the Class E Notes to fund the €38 million reserve fund. The reserve fund is available to meet payments on the senior fees and interest and principal on the Class A, Class B, Class C and Class D Notes. The principal paid under the notes will be fully sequential with principal paid first to the Class A Notes until redeemed in full; after payment of the Class A Notes, the Class B Notes will start to amortise. The amortization of the Class C and Class D Notes will be also fully sequential and will start after Class B Notes are paid down in full. The transaction has a four-year revolving period starting as of the first payment date, 20 March 2015, and will end as of the payment date 20 December 2018. Throughout the revolving period, principal collections will be used to purchase new receivables according to the loan eligibility criteria and global eligibility criteria detailed within the transaction documents. The transaction includes a liquidity reserve and commingling reserve that will be made available upon breach of certain triggers.
• The rating of the Class A Notes addresses the timely payment of interest and full payment of principal by the legal final maturity date in accordance with the terms and conditions of the notes. The ratings of the Class B, Class C, Class D and Class E Notes address the ultimate payment of interest and full payment of principal by the legal final maturity date in accordance with the terms and conditions of the notes.
• The portfolio consists of 100% fixed auto loan receivables. The fixed payment on the series of bonds and fixed payment of the auto loan receivables is unhedged. DBRS deems interest rate risk in this transaction to be limited.
• As of 20 October 2014, the preliminary portfolio main characteristics include: (i) 83,180 loan contracts, 82,621 borrowers and €10,395 average loan amount; (ii) 5.68 years weighted-average (WA) original term, 4.92 years WA remaining term and 9.11 months seasoning; (iii) 100% of the auto loan receivables are tied to a fixed rate with a WA interest rate of 8.70%; (iv) 14.24% of the auto loans were granted to self-employed borrowers and 5.22% to borrowers deemed not employed; (v) foreign borrowers resident in Spain account for 6.37% of the portfolio; (vi) top geographical concentrations are Andalucía (19.84%), Madrid (15.12%) and Cataluña (14.03%); (vii) top three concentrations by vehicle brand are Hyundai (20.40%), Kia (46.63%) and Opel (11.60%); and (viii) 78.29% of the portfolio are auto loan receivables to finance the purchase of new vehicles.
• Relevant credit enhancement is in the form of a cash reserve account and subordination. Credit enhancement levels are sufficient to support DBRS-projected expected cumulative net loss assumption under various stress scenarios at A (sf), BBB (sf), BB (low) (sf), B (low) (sf) and C (sf).
• The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested.
• The transaction parties’ capabilities with respect to originations, underwriting, servicing and financial strength.
• The credit quality of the collateral and ability of SCF to manage collections activities on the collateral.
• The legal structure and presence of legal opinions addressing the assignment of the assets to the Issuer and the consistency with DBRS’s “Legal Criteria for European Structured Finance Transactions.”

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is Rating European Consumer and Commercial Asset-Backed Securitisations. Other methodologies and criteria referenced in this transaction are listed at the end of this press release and can be found at http://www.dbrs.com/about/methodologies.

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” at http://www.dbrs.com/research/239786/the-effect-of-sovereign-risk-on-securitisations-in-the-euro-area.pdf.

The sources of information used for this rating include the Management Company and SCF. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality. The information upon which DBRS ratings and reports are based, and any other content displayed on the Site, is obtained by DBRS from sources DBRS believes to be accurate and reliable. DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance. The extent of any factual investigation or independent verification depends on facts and circumstances.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):

• Base-case probability of default (PD) of 9.62%, a 25% and 50% increase on the base-case PD.
• Base-case recovery rate of 49.41% (or a loss given default (LGD) of 50.59%), a 25% and 50% increase on the base-case LGD.

DBRS concludes that for the Class A Notes:
• A hypothetical increase of the base-case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would maintain the rating of the Class A Notes at A (sf).
• A hypothetical increase of the base-case PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would downgrade the rating of the Class A Notes to BBB (high) (sf).
• A hypothetical increase of the base-case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would downgrade the rating of the Class A Notes to BBB (high) (sf).
• A hypothetical increase of the base-case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would downgrade the rating of the Class A Notes to BBB (low) (sf).
• A hypothetical increase of the base-case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would downgrade the rating of the Class A Notes to BBB (low) (sf).
• A hypothetical increase of the base-case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would downgrade the rating of the Class A Notes to BB (sf).

DBRS concludes that for the Class B Notes:
• A hypothetical increase of the base-case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would maintain the rating of the Class B Notes at BBB (sf).
• A hypothetical increase of the base-case PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would downgrade the rating of the Class B Notes to BBB (low) (sf).
• A hypothetical increase of the base-case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would downgrade the rating of the Class B Notes to BBB (low) (sf).
• A hypothetical increase of the base-case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would downgrade the rating of the Class B Notes to BB (low) (sf).
• A hypothetical increase of the base-case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would downgrade the rating of the Class B Notes to BB (low) (sf).
• A hypothetical increase of the base-case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would downgrade the rating of the Class B Notes to B (sf).

DBRS concludes that for the Class C Notes:
• A hypothetical increase of the base-case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would maintain the rating of the Class C Notes at BB (low) (sf).
• A hypothetical increase of the base-case PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would maintain the rating of the Class C Notes at BB (low) (sf).
• A hypothetical increase of the base-case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would maintain the rating of the Class C Notes at BB (low) (sf).
• A hypothetical increase of the base-case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would downgrade the rating of the Class C Notes to B (low) (sf).
• A hypothetical increase of the base-case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would downgrade the rating of the Class C Notes to B (low) (sf).
• A hypothetical increase of the base-case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would downgrade the rating of the Class C Notes to CCC (sf).

DBRS concludes that for the Class D Notes:
• A hypothetical increase of the base-case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would maintain the rating of the Class D Notes at B (low) (sf).
• A hypothetical increase of the base-case PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would maintain the rating of the Class D Notes at B (low) (sf).
• A hypothetical increase of the base-case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would maintain the rating of the Class D Notes at B (low) (sf).
• A hypothetical increase of the base-case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would downgrade the rating of the Class D Notes to CCC (sf).
• A hypothetical increase of the base-case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would downgrade the rating of the Class D Notes to CCC (sf).
• A hypothetical increase of the base-case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would downgrade the rating of the Class D Notes to CC (sf).

For further information on DBRS historic default rates published by the European Securities and Markets Administration in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: David Sanchez Rodriguez
Initial Final Rating Date: November 20, 2014
Initial Final Rating Committee Chair: Chuck Weilamann
Lead Surveillance Analyst: Vito Natale

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960.

The rating methodologies and criteria used in the analysis of this transaction can be found at:
http://www.dbrs.com/about/methodologies

• Rating European Consumer and Commercial Asset-Backed Securitisations
• Legal Criteria for European Structured Finance Transactions
• Operational Risk Assessment for European Structured Finance Servicers