Morningstar DBRS Upgrades and Confirms Credit Ratings on Two Santander Consumer Spain Auto Transactions

DBRS Ratings GmbH (Morningstar DBRS) took the following credit rating actions on the notes issued by Santander Consumer Spain Auto 2019-1, FT (SCSA 2019-1) and Santander Consumer Spain Auto 2020-1 FT (SCSA 2020-1):

SCSA 2019-1:
-- Class A Notes upgraded to AAA (sf) from AA (high) (sf)
-- Class B Notes confirmed at AA (sf)
-- Class C Notes upgraded to A (high) (sf) from A (sf)
-- Class D Notes confirmed at BBB (high) (sf)

SCSA 2020-1:
-- Series A Notes confirmed at AA (sf)
-- Series B Notes confirmed at A (sf)
-- Series C Notes confirmed at A (low) (sf)
-- Series D Notes confirmed at BBB (sf)
-- Series E Notes confirmed at BB (high) (sf)

The credit ratings on the respective Class A Notes and Series A Notes address the timely payment of interest and the ultimate repayment of principal on or before the respective legal final maturity dates in December 2035 for SCSA 2019-1 and March 2033 for SCSA 2020-1. The credit rating on the Class B Notes in SCSA 2019-1 addresses the timely payment of interest when most senior and the ultimate payment of principal by the legal final maturity date. The credit ratings on the remaining rated notes address the ultimate payment of interest and principal by their respective legal final maturity dates.

The credit rating actions follow an annual review of the transactions and are based on the following analytical considerations:
-- Updated portfolio performance, in terms of delinquencies, defaults, and losses, as of the June 2024 payment date;
-- Updated probability of default (PD) and loss given default (LGD) assumptions on the remaining receivables; and
-- Current available credit enhancement to the rated notes to cover the expected losses at their respective credit rating levels.

The transactions are securitisations of Spanish auto loan receivables originated and serviced by Santander Consumer E.F.C. (SC EFC). The original portfolios of EUR 550.0 million and EUR 520.0 million for SCSA 2019-1 and SCSA 2020-1, respectively, consisted of loans granted primarily to private individuals (96.6% and 97.2% of the portfolio balance, respectively), for the purchase of both new and used vehicles. SCSA 2019-1 closed in October 2019 and included a 26-month revolving period, which ended in December 2021, while SCSA 2020-1 is a static securitisation, which closed in September 2020.

PORTFOLIO PERFORMANCE
SCSA 2019-1:
As of the June 2024 payment date, loans that were 0 to 30 days, 30 to 60 days, and 60 to 90 days delinquent represented 4.1%, 1.2%, and 0.8% of the outstanding portfolio balance, respectively. Gross cumulative defaults, defined as loans more than 90 days in arrears, amounted to 4.0% of the aggregate initial and subsequent portfolios original balance, 77.2% of which has been recovered to date.

SCSA 2020-1:
As of the June 2024 payment date, loans that were 0 to 30 days, 30 to 60 days, and 60 to 90 days delinquent represented 3.6%, 1.0%, and 0.7% of the outstanding portfolio balance, respectively. Gross cumulative defaults amounted to 2.7% of the initial portfolio original balance, 70.0% of which has been recovered to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
For SCSA 2019-1, Morningstar DBRS updated its base-case PD and LGD assumptions to 4.5% and 46.5%, respectively, while for SCSA 2020-1, Morningstar DBRS updated its base-case PD and LGD assumptions to 4.1% and 45.3%, respectively.

CREDIT ENHANCEMENT
SCSA 2019-1:
The subordination of the respective junior obligations provides credit enhancement to the rated notes. As of the June 2024 payment date, credit enhancement to the Class A Notes increased to 38.6% from 25.0% at the time of the previous annual review 12 months ago; credit enhancement to the Class B Notes increased to 17.6% from 13.0%; credit enhancement to the Class C Notes increased to 7.5% from 7.3%; and credit enhancement to the Class D Notes decreased to 3.9% from 5.2%. The credit enhancement available to the Class D Notes is lower than 12 months ago due to the erroneous computation of defaulted receivables in March 2023 which triggered an early sequential amortization of the notes, corrected then on the following payment date, and caused credit enhancement levels to be momentarily higher in June 2023.

The transaction benefits from liquidity support provided by a nonamortising cash reserve, available to cover senior expenses, swap payments, and interest payments on the collateralised notes. The reserve has a target balance equal to 1.0% of the initial outstanding balance of the Class A to E Notes and, as of the June 2024 payment date, stood at its target balance of EUR 5.46 million.

SCSA 2020-1:
The subordination of the respective junior obligations provides credit enhancement to the rated notes. As of the June 2024 payment date, credit enhancement to the Series A Notes remained at 13.5%; credit enhancement to the Series B Notes remained at 8.8%; credit enhancement to the Series C Notes remained at 5.2%; credit enhancement to the Series D Notes remained at 1.9%; and credit enhancement to the Series E Notes remained at 0.0%. The credit enhancement levels have remained unchanged since the Morningstar DBRS initial credit rating analysis as the rated notes have been repaying principal on a pro rata basis since closing, in accordance with the transaction's priority of payments.

The transaction benefits from liquidity support provided by an amortising cash reserve, available to cover senior expenses and interest payments on the rated notes. The reserve has a target balance equal to 1.0% of the outstanding balance of the Series A to E Notes, subject to a floor of EUR 2.60 million. As of the June 2024 payment date, the reserve was at its floor level of EUR 2.60 million.

Santander Consumer Finance, S.A. (SCF) acts as the account bank for the transactions. Based on Morningstar DBRS' private credit rating of SCF, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structures, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit ratings assigned to the notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

Banco Santander SA (Santander) acts as the hedging counterparty in both transactions. Morningstar DBRS' public Long-Term Critical Obligations Rating of Santander at AA (low) is consistent with the First Rating Threshold as described in Morningstar DBRS' "Derivative Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS's long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the "Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings" at https://dbrs.morningstar.com/research/437781.

Morningstar DBRS analysed the transaction structures in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is the "Master European Structured Finance Surveillance Methodology" (6 August 2024), https://dbrs.morningstar.com/research/437540.

Other methodologies referenced in these transactions are listed at the end of this press release.

In SCSA 2020-1, the credit rating on the Series E Notes materially deviates from the higher credit rating implied by the cash flow analysis. Morningstar DBRS considers a material deviation to be a credit rating differential of three or more notches between the assigned credit rating and the credit rating implied after the application of the relevant methodologies. The credit rating on the Series E Notes reflect the lack of credit enhancement available to the notes and their sensitivity to the timing of the sequential redemption trigger breach, which is dependent on future transaction performance.

Morningstar DBRS has applied the principal methodology consistently and conducted a review of the transactions in accordance with the principal methodology.

A review of the transactions legal documents was not conducted as the legal documents have remained unchanged since the most recent credit rating action.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to "Appendix C: The Impact of Sovereign Credit Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://dbrs.morningstar.com/research/436000.

The sources of data and information used for these credit ratings include quarterly transaction reports and information provided by Santander de Titulización S.G.F.T., S.A. (the Management Company), and loan-level data provided by the European DataWarehouse GmbH.

Morningstar DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial credit ratings, Morningstar DBRS was supplied with third-party assessments. However, this did not impact the credit rating analysis.

Morningstar DBRS considers the data and information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

Morningstar DBRS does not audit or independently verify the data or information it receives in connection with the credit rating process.

The last credit rating action on SCSA 2019-1 took place on 23 August 2023, when Morningstar DBRS confirmed its credit ratings on the Class A, Class B, Class C and Class D Notes at AA (high) (sf), AA (sf), A (sf) and BBB (high) (sf), respectively.

The last credit rating action on SCSA 2020-1 took place on 23 August 2023, when Morningstar DBRS confirmed its credit ratings on the Series A and Series B Notes at AA (sf) and A (sf), respectively, and upgraded its credit ratings on the Series C, Series D and Series E Notes to A (low) (sf), BBB (sf), and BB (high) (sf) from BBB (high) (sf), BBB (low) (sf) and BB (sf), respectively.

The lead analyst responsibilities for these transactions have been transferred to Helvia Meana.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit ratings, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit ratings (the base case):

-- Morningstar DBRS expected a lifetime base case PD and LGD for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- For SCSA 2019-1, the base case PD and LGD of the current pool of loans are 4.5% and 46.5%, respectively.
-- For SCSA 2020-1, the base case PD and LGD of the current pool of loans are 4.1% and 45.3%, respectively.

SCSA 2019-1 Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)

SCSA 2019-1 Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD, expected credit rating of AA (sf)
-- 50% increase in PD, expected credit rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of A (high) (sf)

SCSA 2019-1 Class C Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of A (high) (sf)
-- 50% increase in LGD, expected credit rating of A (low) (sf)
-- 25% increase in PD, expected credit rating of A (high) (sf)
-- 50% increase in PD, expected credit rating of A (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of A (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BBB (sf)

SCSA 2019-1 Class D Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of BBB (sf)
-- 50% increase in LGD, expected credit rating of BB (high) (sf)
-- 25% increase in PD, expected credit rating of BBB (sf)
-- 50% increase in PD, expected credit rating of BBB (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of BBB (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BB (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BB (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of B (high) (sf)

SCSA 2020-1 Series A Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of A (high) (sf)
-- 50% increase in LGD, expected credit rating of A (low) (sf)
-- 25% increase in PD, expected credit rating of A (high) (sf)
-- 50% increase in PD, expected credit rating of A (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of A (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BBB (sf)

SCSA 2020-1 Series B Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of A (low) (sf)
-- 50% increase in LGD, expected credit rating of BBB (high) (sf)
-- 25% increase in PD, expected credit rating of A (low) (sf)
-- 50% increase in PD, expected credit rating of A (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BBB (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BBB (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BBB (low) (sf)

SCSA 2020-1 Series C Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of BBB (high) (sf)
-- 50% increase in LGD, expected credit rating of BBB (high) (sf)
-- 25% increase in PD, expected credit rating of BBB (high) (sf)
-- 50% increase in PD, expected credit rating of BBB (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of BBB (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BBB (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BBB (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BB (high) (sf)

SCSA 2020-1 Series D Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of BBB (sf)
-- 50% increase in LGD, expected credit rating of BBB (low) (sf)
-- 25% increase in PD, expected credit rating of BBB (sf)
-- 50% increase in PD, expected credit rating of BBB (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of BBB (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BB (low) (sf)

SCSA 2020-1 Series E Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of BB (high) (sf)
-- 50% increase in LGD, expected credit rating of BB (high) (sf)
-- 25% increase in PD, expected credit rating of BB (high) (sf)
-- 50% increase in PD, expected credit rating of BB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of BB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BB (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BB (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of B (high) (sf)

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Helvia Meana, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Associate Managing Director
Initial Rating Date: 8 October 2019 (SCSA 2019-1), 26 August 2020 (SCSA 2020-1)

DBRS Ratings GmbH
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60311 Frankfurt am Main Deutschland
Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

The credit rating methodologies used in the analysis of these transactions can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Rating European Structured Finance Transactions Methodology (25 June 2024),
https://dbrs.morningstar.com/research/434970.
-- Legal Criteria for European Structured Finance Transactions (28 June 2024),
https://dbrs.morningstar.com/research/435165.
-- Master European Structured Finance Surveillance Methodology (6 August 2024),
https://dbrs.morningstar.com/research/437540.
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024), https://dbrs.morningstar.com/research/437781.
-- Operational Risk Assessment for European Structured Finance Servicers (6 August 2024), https://dbrs.morningstar.com/research/437543.
-- Rating European Consumer and Commercial Asset-Backed Securitisations (8 January 2024), https://dbrs.morningstar.com/research/426219.
-- Interest Rate Stresses for European Structured Finance Transactions (28 June 2024), https://dbrs.morningstar.com/research/435278.
-- Derivative Criteria for European Structured Finance Transactions (28 June 2024),
https://dbrs.morningstar.com/research/435260.

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/278375.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.