NEW YORK--(BUSINESS WIRE)--As part of its ongoing surveillance, Fitch Ratings has taken the following rating actions on the Santander Drive Auto Receivables Trust (SDART) 2014-1 and 2014-2 transactions:
2014-1:
--Class A-3 affirmed at 'AAAsf'; Outlook Stable;
--Class B upgraded to 'AAAsf' from 'AAsf'; Outlook Stable;
--Class C upgraded to 'AAsf' from 'Asf'; Outlook revised to Positive from Stable;
--Class D upgraded to 'Asf' from 'BBBsf'; Outlook revised to Positive from Stable;
--Class E upgraded to 'BBBsf' from 'BBsf'; Outlook Stable.
2014-2:
--Class A-2a affirmed at 'AAAsf'; Outlook Stable;
--Class A-2b affirmed at 'AAAsf'; Outlook Stable;
--Class A-3 affirmed at 'AAAsf'; Outlook Stable;
--Class B upgraded to 'AAAsf' from 'AAsf'; Rating Watch Positive removed and Outlook Stable assigned;
--Class C upgraded to 'AAsf' from 'Asf; Outlook revised to Positive from Stable;
--Class D upgraded to 'Asf' from 'BBBsf'; Outlook revised to Positive from Stable;
--Class E upgraded to 'BBBsf' from 'BBsf'; Outlook Stable.
KEY RATING DRIVERS
The rating actions are based on available credit enhancement and loss performance. The collateral pools continue to perform within Fitch's expectations. Under the credit enhancement structures, the securities are able to withstand stress scenarios consistent with the current rating and make full payments to investors in accordance with the terms of the documents.
To date, the transactions have exhibited strong performance with losses within Fitch's initial expectations, with rising loss coverage and multiple levels consistent with the current ratings. A material deterioration in performance would have to occur within the asset pool to have potential negative impact on the outstanding ratings.
For the 2014-1 transaction, Fitch revised its loss proxy downward to approximately 13.75%, as losses are currently extrapolating below Fitch's prior base case loss proxy of 16.00% assigned at the last review of the transaction. For the 2014-2 transaction, Fitch revised its loss proxy downward to approximately 13.50%, as losses are currently extrapolating below Fitch's prior base case loss proxy of 16.45% assigned at the last review of the transaction. Based on current loss trends, Fitch expects CNL for both transactions to be in the 11%-14% range.
The upgrades reflect the improved loss coverage available to the notes. Further, Fitch will continue to monitor both transactions and may take additional rating actions in the future. The ratings reflect the quality of Santander Consumer USA, Inc.'s retail auto loan originations, the adequacy of its servicing capabilities, and the sound financial and legal structure of the transaction.
RATING SENSITIVITIES
Unanticipated increases in the frequency of defaults and loss severity could produce loss levels higher than the current projected base case loss proxies and impact available loss coverage and multiples levels for both transactions. Lower loss coverage could impact ratings and Rating Outlooks, depending on the extent of the decline in coverage.
In both transactions, the class E notes exhibit slight declines in loss coverage multiples under a back-ended loss timing scenario. All notes senior the class E notes in both structures show muted growth in net loss coverage under a back-ended loss timing scenario. Despite the slight decline, the net loss coverage multiple under the back ended scenario for the class E is still in excess of the recommended multiple for 'BBBsf'.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch's analysis of the Representation and Warranties (R&W) of this transactions in this review can be found in the respective appendices to each presale report. 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.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14
May 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158
Criteria for Interest Rate Stresses in Structured Finance Transactions
and Covered Bonds (pub. 19 Dec 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868
Fitch's Interest Rate Stress Assumptions for Structured Finance and
Covered Bonds - Excel File (pub. 22 Dec 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=840189
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952
Rating Criteria for U.S. Auto Loan ABS (pub. 10 Apr 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863979
Related Research
Santander Drive Auto Receivables Trust 2014-1 -- Appendix
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=728706
Santander Drive Auto Receivables Trust 2014-2 -- Appendix
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=745597
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=992221
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=992221
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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