NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned the following ratings to the Santander Drive Auto Receivables Trust 2014-5 notes:
--$176,300,000 class A-1 notes 'F1+sf';
--$143,000,000 class A-2A notes 'AAAsf'; Outlook Stable;
--$190,000,000 class A-2B notes 'AAAsf'; Outlook Stable;
--$123,050,000 class A-3 notes 'AAAsf'; Outlook Stable;
--$123,530,000 class B notes 'AAsf'; Outlook Stable;
--$152,940,000 class C notes 'Asf'; Outlook Stable;
--$91,180,000 class D notes 'BBBsf'; Outlook Stable;
--$58,820,000 class E notes 'BBsf'; Outlook Stable.
KEY RATING DRIVERS
Weaker Credit Quality: 2014-5 is backed by marginally weaker collateral versus prior 2013-2014, with a slightly weaker internal weighted average (WA) loss forecast score (LFS) of 556 and FICO of 598. The WA seasoning is two months, new vehicles total 36%, and the pool is geographically diverse.
Increase in Extended Term Contracts: Loans with terms of 60+ months rose to 93.9%, the highest to date, driven by a notable increase in 73 -75-term loans totaling 15%, the highest seen to date. Fitch applied a stress to the loss proxy to account for the risk posed by these loans since they are not seasoned and perform weaker than loans with 72-month term or less.
Sufficient Credit Enhancement and Structure: The cash flow distribution is a sequential pay structure. Initial hard credit enhancement (CE) totals 48.25% for the class A notes, unchanged from 2014-4 (not rated), but is higher versus the previous Fitch-rated transaction (2014-2) for the class A - C notes.
Stable Portfolio/Securitization Performance: Although within range of 2010-2012 performance, recent 2013 losses are higher to date tracking slightly above the 2012 vintage, 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, evidenced by historical portfolio delinquency, loss experience, and securitization performance. Fitch deems SCUSA capable to service 2014-5.
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 and could result in potential rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to SDART 2014-5 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, showing 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 up to three or more rating categories, under Fitch's severe (2.5x base case loss) scenario.
Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report.
The presale report is available to all investors on Fitch's website at 'www.fitchratings.com'. For more information about Fitch's comprehensive subscription service Fitch Research, which includes all presale reports, surveillance, and credit reports on more than 20 asset classes, contact product sales at +1-212-908-0800 or at 'email@example.com'.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (August 2014);
--'Rating Criteria for U.S. Auto Loan ABS' (April 2014);
--'Criteria for Interest Rate Stresses in Structured Finance Transactions' (January 2014);
--'Santander Drive Auto Receivables Trust 2014-5' (US ABS) (November 2014);
--'Santander Drive Auto Receivables Trust 2014-5 - Appendix' (November 2014);
--'Structured Finance Tranche Thickness Metrics' (July 29, 2011).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
Rating Criteria for U.S. Auto Loan ABS
Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds
Santander Drive Auto Receivables Trust 2014-5 (US ABS)
Santander Drive Auto Receivables Trust 2014-5 -- Appendix
Structured Finance Tranche Thickness Metrics