Fitch Expects to Rate Santander Drive Auto Receivables Trust 2015-5; Presale Issued
--$142,000,000 class A-1 notes 'F1+sf';
--$225,000,000 class A-2-A and A-2-B notes 'AAAsf'; Outlook Stable;
--$89,610,000 class A-3 notes 'AAAsf'; Outlook Stable;
--$96,180,000 class B notes 'AAsf'; Outlook Stable;
--$116,030,000 class C notes 'Asf'; Outlook Stable;
--$81,180,000 class D notes 'BBBsf'; Outlook Stable;
--$44,120,000 class E notes 'BBsf'; Outlook Stable.
KEY RATING DRIVERS
Consistent Credit Quality: The collateral backing 2015-5 is consistent with that of 2015-4, with a weighted average (WA) FICO score of 600 and an internal WA loss forecast score (LFS) of 555. The WA seasoning is 4.8 months, new vehicles total 40.1%, and the pool is geographically diverse.
Increased Extended-Term Contracts: Loans with terms of 60+ months total 91.9%, with 73-75 month term loans totalling 15.2% in 2015-5. Fitch applied a stress to the loss proxy to account for the risk posed by these loans, since performance history is limited and the expectation is that they will perform worse than loans with terms less than or equal to 72 months.
Sufficient Credit Enhancement and Structure: The cash flow distribution is a sequential-pay structure. Initial hard credit enhancement (CE) totals 50.25% for the class A notes, slightly higher versus 49.85 in 2015-4, while excess spread totals approximately 10.40% per annum.
Stable Portfolio/Securitization Performance: Although within range of the 2010-2012 performance, recent 2013-2015 portfolio and securitization losses are tracking slightly higher to date, driven by marginally weaker collateral underwriting and lower recoveries from softer used vehicle values.
Stable Corporate Health: SCUSA recorded solid financial results recently and has been profitable since 2007. Fitch rates Santander, majority owner of SCUSA, 'A-/F2/Outlook Stable.
Consistent Origination/Underwriting/Servicing: SCUSA demonstrates adequate abilities as originator, underwriter and servicer, as evidenced by historical portfolio and securitization performance. Fitch deems SCUSA capable to service this series.
Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of SCUSA would not impair the timeliness of payments on the securities.
Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than the base case. This in turn could result in Fitch taking negative rating actions on the notes.
Fitch evaluated the sensitivity of the ratings assigned to Santander Drive Auto Receivables Trust 2015-5 to increased credit losses over the life of the transaction. Fitch's analysis found that the transaction displays some sensitivity to increased defaults and credit losses. This shows a potential downgrade of one or two categories under Fitch's moderate (1.5x base case loss) scenario, especially for the subordinate bonds. The notes could experience downgrades of three or more rating categories, potentially leading to distressed ratings (below 'Bsf') or possibly default, under Fitch's severe (2.0x base case loss) scenario.
DUE DILIGENCE USAGE
Fitch was provided with third-party due diligence information from Deloitte and Touche, LLP. The third-party due diligence focused on comparing or recomputing certain information with respect to 175 loans from the statistical data file. Fitch considered this information in its analysis and the findings did not have an impact on our analysis/conclusions. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained on the bottom of this rating action commentary.
Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in the reports titled 'Santander Drive Auto Receivables Trust 2015-5 -- Appendix'. These R&W are compared to those of typical R&W for the asset class as detailed in the special report 'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' dated June 12, 2015.
Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report, available at 'www.fitchratings.com'.