DBRS Assigns New Ratings to Santander Synthetic Prime Auto Issuance Notes 2019-A

DBRS, Inc. (DBRS) assigned new ratings to the following classes of credit linked notes, Santander Synthetic Prime Auto Issuance Notes 2019-A (the Notes), issued by Banco Santander, S.A. (Banco Santander or the Issuer; rated A (high) with a Stable trend by DBRS):

-- $96,700,500 Class C Notes rated A (sf)
-- $60,783,000 Class D Notes rated BBB (sf)
-- $34,536,000 Class E Notes rated BB (low) (sf)
-- $23,484,000 Class F Notes rated B (low) (sf)

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

-- Transaction capital structure as well as the form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of subordination. Credit enhancement levels are sufficient to support DBRS-projected expected cumulative net loss assumptions under various stress scenarios.
-- Upon the occurrence of a performance-related Subordination Event related to the Reference Portfolio, the Class A, B, C, D, E, F and G Notes will be paid down sequentially.
-- Net credit loss amounts on the Reference Portfolio will be applied on a reverse-sequential basis to the Notes beginning with the most subordinate tranche.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the ratings address the payment of principal by the legal final maturity date.
-- The credit quality of the Issuer, Banco Santander.
-- The credit quality of the Reference Portfolio, a pool of prime and near-prime retail installment contracts secured by new and used vehicles to borrowers in the United States originated by Santander Consumer USA Inc. (SC).
-- As of the Cut-Off Date, the reference pool has a weighted-average (WA) non-zero FICO score of 753, a WA loan-to-value ratio of 96.52%, a WA payment-to-income ratio of 7.95% and a WA debt-to-income ratio of 30.45%.
-- The reference pool comprises SC originations from Q4 2016 through Q2 2018 with a WA seasoning of 20 months and a WA remaining term of approximately 51 months.
-- Approximately 3.44% of the balance of the reference pool is commercial loans with co-obligors or guarantors.
-- Approximately 11.92% of the balance of the reference pool has original loan terms ranging from 76 months to 84 months.
-- SC’s history as an originator in the retail auto loan business, its capabilities with respect to underwriting and servicing and its ownership by Banco Santander.
-- DBRS has performed an operational review of SC and considers the entity to be an acceptable originator and servicer of prime and near-prime automobile loan contracts.
-- The SC senior management team has considerable experience and a successful track record within the auto finance industry.
-- Santander Holdings USA, Inc. (SHUSA) owns approximately 69.8% of SC. SHUSA is 100% owned by Banco Santander.
-- SSPAIN 2019-A provides for Class F Notes with an assigned rating of B (low) (sf). While the DBRS “Rating U.S. Retail Auto Loan Securitizations” methodology does not set forth a range of multiples for this asset class for the B (sf) level, the analytical approach for this rating level is consistent with that contemplated by the methodology. The typical range of multiples applied in the DBRS stress analysis in the B (sf) range is 1.10 times (x) to 1.25x.
-- Payments of principal and interest are unsecured liabilities of the Issuer.
-- Payment of principal on the Notes is subject to both the terms and conditions related to the Reference Portfolio as well as the ability and willingness of the Issuer, Banco Santander, to make payments.

Consequently, the ratings on the Notes are limited to the rating of the Issuer and may be affected by migration in the ratings of Banco Santander.

DBRS notes that the above press release was amended on July 8, 2019, to add notes about third-party assessments and an accompanying risk sensitivity appendix. The amendments were minor and would not impact the understanding of the reader.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is Rating U.S. Retail Auto Loan Securitizations, which can be found on dbrs.com under Methodologies & Criteria.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

This rating is endorsed by DBRS Ratings Limited for use in the European Union. The following additional regulatory disclosures apply to endorsed ratings:

This is the first DBRS rating on this financial instrument.

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

Lead Analyst: Chris D’Onofrio, Managing Director, U.S. ABS, Global Structured Finance
Rating Committee Chair: Christian Aufsatz, Managing Director, Head of European Structured Finance
Initial Rating Date: July 1, 2019

DBRS will publish a full report shortly that will provide addi¬tional analytical detail on this rating action. If you are interested in receiving this report, contact us at info@dbrs.com.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

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