Morningstar DBRS Finalises Provisional Credit Ratings on Santander Consumer Spain Auto 2024-1 FT

DBRS Ratings GmbH (Morningstar DBRS) finalised its provisional credit ratings on the following classes of notes (the Rated Notes) issued by Santander Consumer Spain Auto 2024-1 FT (the Issuer):

-- Class A Notes at AA (sf)
-- Class B Notes at A (high) (sf)
-- Class C Notes at BBB (high) (sf)

Morningstar DBRS did not assign a credit rating to the Class D Notes (together with the Rated Notes, the Notes) also issued in this transaction.

The finalised credit ratings on the Class B Notes and Class C Notes are one notch higher than the provisional credit ratings Morningstar DBRS assigned. As a result of lower overall margins of the Notes and a lower swap fixed rate, the cash flow analysis on the Rated Notes improved in their credit rating stress scenarios.

The credit rating on the Class A Notes addresses the timely payment of scheduled interest and the ultimate repayment of principal by the final maturity date. The credit ratings on the Class B Notes and Class C Notes address the ultimate payment of interest (timely when they are the most senior class of Notes outstanding) and the ultimate repayment of principal by the final maturity date.

CREDIT RATING RATIONALE
The Rated Notes are backed by a portfolio of fixed-rate receivables related to auto loans granted by Santander Consumer Finance (SCF; the Originator or the Seller) to private individuals and corporates residing in Spain for the acquisition of new or used vehicles. SCF also services the portfolio (the Servicer).

Morningstar DBRS' credit ratings are based on the following analytical considerations:
-- The transaction's structure, including the form and sufficiency of available credit enhancement to withstand stressed cash flow assumptions and repay the Issuer's financial obligations according to the terms under which the Rated Notes have been issued;
-- The credit quality of SCF's portfolio, the characteristics of the collateral, its historical performance, and Morningstar DBRS-projected behaviour under various stress scenarios;
-- SCF's capabilities with respect to originations, underwriting, servicing, and its position in the market and financial strength.
-- The operational risk review of SCF, which Morningstar DBRS deems to be an acceptable Servicer;
-- The transaction parties' financial strength with regard to their respective roles;
-- The consistency of the transaction's legal structure with Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology;
-- The consistency of the transaction's hedging structure with Morningstar DBRS' "Derivative Criteria for European Structured Finance Transactions" methodology; and,
-- The sovereign rating on the Kingdom of Spain, currently rated "A" with a Positive trend by Morningstar DBRS.

TRANSACTION STRUCTURE
The transaction distributes payments through separate interest and principal priorities of payments and benefits from an amortising cash reserve funded at closing to an amount equal to 1.0% of the Rated Notes' outstanding balance and floored at 0.5% of the Rated Notes' initial balance. The cash reserve will also not amortise if it is not funded to the required level or if a subordination event occurs. The cash reserve is part of the available funds and covers senior costs, swap payments, and interests on the Rated Notes, as long as there is no interest deferral.

The transaction includes a three-month revolving period. The repayment of the Rated Notes will start on the first amortisation payment date in March 2025 on a pro rata basis unless certain events, such as breach of performance triggers or replacement of the Servicer, occur. Under these circumstances, the principal repayment of the Rated Notes will become fully sequential, and the switch is not reversible. Interest and principal payments on the Rated Notes will be made quarterly.

All underlying contracts are fixed rate, while the Notes pay a floating rate. The Notes are indexed to three-month Euribor. The interest rate risk is mitigated through an interest rate swap for the Rated Notes.

COUNTERPARTIES
Société Générale, Sucursal en España (SG) has been appointed as the Issuer's account bank for the transaction. Morningstar DBRS holds a private rating on SG and has a Long-Term Issuer Rating of A (high) with a Stable trend on Société Générale, S.A. Morningstar DBRS has concluded that SG meets the minimum criteria to act in its capacity as account bank. The transaction documents contain downgrade provisions related to the account bank consistent with Morningstar DBRS' criteria.

Banco Santander S.A. (Banco Santander) has been appointed as the swap counterparty. Morningstar DBRS' public Long Term Critical Obligations Rating on Banco Santander is AA (low) with a Stable trend, which meets the criteria to act in its capacity as swap counterparty. The hedging documents contain downgrade provisions consistent with Morningstar DBRS' criteria.

Morningstar DBRS' credit ratings on the Rated Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. For the Rated Notes, the associated financial obligations are the related interest payment amounts and the related principal outstanding balances.

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations.

Morningstar DBRS' 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, AND 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 structure in Intex Dealmaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is "Rating European Consumer and Commercial Asset-Backed Securitisations" (18 September 2024), https://dbrs.morningstar.com/research/439583.

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

Morningstar DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology. An asset and a cash flow analysis were both conducted. Because of the inclusion of a revolving period in the transaction, the analysis considers potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to "Appendix C: The Impact of Sovereign 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 the Seller and its agents. Morningstar DBRS received:
-- Quarterly static default data covering Q4 2017 up to Q1 2024, split between new and used vehicles;
-- Monthly static recovery data covering Q4 2017 up to Q1 2024, split between new and used vehicles;
-- Dynamic delinquencies and prepayments monthly data going back to January 2013 and up to June 2024, split between new and used vehicles;
-- Detailed stratification tables related to the asset provisional portfolio selected by SCF as of 18 July 2024;
-- Loan-by-loan provisional portfolio selected by SCF as of 18 July 2024; and
-- A theorical amortisation of the provisional pool.

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

Morningstar DBRS was supplied with third-party assessments. However, this did not affect 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.

These credit ratings concern newly issued new financial instruments. These are the first Morningstar DBRS credit ratings on these financial instruments.

This is the first credit rating action since the Initial Rating Date.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on 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):

-- Expected default rate: 8.4%
-- Expected recovery rate: 66.3%
-- Loss given default (LGD): 56.7% for the AA (sf) scenario, 53.2% for the A (high) (sf) scenario, and 47.8% for the BBB (high) (sf) scenario.

Scenario 1: 25% increase in LGD
Scenario 2: 50% increase in LGD
Scenario 3: 25% increase in PD
Scenario 4: 50% increase in PD
Scenario 5: 25% increase in PD and 25% increase in LGD
Scenario 6: 25% increase in PD and 50% increase in LGD
Scenario 7: 50% increase in PD and 25% increase in LGD
Scenario 8: 50% increase in PD and 50% increase in LGD

Morningstar DBRS concludes that the expected credit ratings under the eight stress scenarios would be:
-- Class A Notes: AA (sf), AA (low) (sf), AA (sf), AA (low) (sf), AA (low) (sf), A (high) (sf), A (high) (sf), and A (sf)
-- Class B Notes: A (sf), A (low) (sf), A (sf), A (low) (sf), A (low) (sf), BBB (high) (sf), BBB (high) (sf), and BBB (low) (sf)
-- Class C Notes: BBB (sf), BBB (low) (sf), BBB (sf), BBB (low) (sf), BBB (low) (sf), BB (high) (sf), BB (high) (sf), and BB (low) (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: Jose Escandell, Senior Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 6 September 2024

DBRS Ratings GmbH, Sucursal en España
Paseo de la Castellana 81
Plantas 26 & 27 28046 Madrid, Spain
Tel. +34 (91) 903 6500

DBRS Ratings GmbH
Neue Mainzer Straße 75
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 this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Rating European Consumer and Commercial Asset-Backed Securitisations (18 September 2024),
https://dbrs.morningstar.com/research/439583.
-- Rating European Structured Finance Transactions Methodology (18 September 2024),
https://dbrs.morningstar.com/research/439581.
-- Legal Criteria for European Structured Finance Transactions (28 June 2024),
https://dbrs.morningstar.com/research/435165.
-- Derivative Criteria for European Structured Finance Transactions (6 September 2024),
https://dbrs.morningstar.com/research/439043.
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024),
https://dbrs.morningstar.com/research/439913.
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024),
https://dbrs.morningstar.com/research/439571.
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024),
https://dbrs.morningstar.com/research/437781.

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 dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.