DBRS Confirms Ratings on FTA Santander Consumer Spain Auto 2014-1

DBRS Ratings Limited (DBRS) has today confirmed the following ratings on the notes issued by FTA Santander Consumer Spain Auto 2014-1 (the Issuer):

-- Class A Notes confirmed at A (sf)
-- Class B Notes confirmed at BBB (sf)
-- Class C Notes confirmed at BB (low) (sf)
-- Class D Notes confirmed at B (low) (sf)
-- Class E Notes confirmed at C (sf)

The above-mentioned rating actions are based on the following analytical considerations, as described more fully below:

-- Portfolio performance, in terms of defaults and level of delinquencies, as of the September 2015 payment date.
-- Actual gross default rate, recovery rate and expected losses are within DBRS’s expectations.
-- Current available credit enhancement to the Class A, Class B, Class C, Class D and Class E notes to cover the expected losses.

FTA Santander Consumer Spain Auto 2014-1 is a securitisation of a portfolio of auto loan receivables issued in Spain and originated by Santander Consumer E.F.C., S.A. (SCF). The transaction has used the proceeds of Class A, Class B, Class C and Class D Notes to purchase the €760 million portfolio. The Fund also issued the Class E Notes to fund the €38 million reserve fund. The portfolio is serviced by SCF.

The transaction is still in its four-year revolving period during which the seller may sell additional receivables to the Issuer each quarter. There are eligibility criteria and concentration limits in place in order to restrict the portfolio concentration to borrower, contract terms, vehicle type, scoring and geographical distribution. To date, 18,072 loans have been added to the portfolio (EUR 175 million), and concentration limits have not been breached.

The portfolio is very granular with 85,504 loans, and it consists of receivables of EUR 760 million. The portfolio has 19.69 months weighted-average seasoning and a 51.90-month weighted-average remaining term. Approximately 97% of the portfolio was originated in 2013 and 2014 and 1% was originated in 2015. Auto loan receivables to finance the purchase of new vehicles represent 78.48% of the portfolio, and 100% of the loan receivables are tied to fixed rates, with the portfolio of receivables paying a weighted-average fixed interest rate of 8.72%. The portfolio is geographically well distributed across the largest autonomous communities in Spain. The top three regions are Andalusia (19.33%), Catalonia (13.70%) and Madrid (14.21%) and together these account for 47.24% of the portfolio.

The portfolio is performing in line with DBRS’s expectations. To date, there are no defaulted receivables although the 90-day plus delinquency ratio (as a percentage of the performing portfolio) increased to 0.28%.

The 12.5% credit enhancement of the Class A Notes consists of subordination of the Class B, Class C, Class D Notes and the reserve fund. The Class B Notes’ 8.90% credit enhancement consists of subordination of the Class C, Class D Notes and the reserve fund. The Class C Notes’ 6.90% credit enhancement consists of subordination of the Class D Notes and the reserve fund. The Class D Notes’ 5% credit enhancement consists of subordination of the reserve fund.

The amortising reserve fund is available to meet payments on the senior fees, interest and principal on the Class A, Class B, Class C and Class D Notes. It will start to amortise on the occurrence of certain events. The reserve fund is currently at the target level of EUR 38 million. The transaction includes a liquidity reserve and commingling reserve that will be made available upon breach of certain triggers.

Santander Consumer Finance S.A. serves as account bank for the transaction. Its DBRS private rating meets the Minimum Institution Rating requirement given the rating assigned to the Class A notes, as described in the DBRS methodology Legal Criteria for European Structured Finance Transactions.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is the “Master European Structured Finance Surveillance Methodology”, which can be found on www.dbrs.com at http://www.dbrs.com/about/methodologies. DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

DBRS reviewed asset assumptions and conducted a cash flow analysis for informational purposes. However, because of the inclusion of a revolving period in the transaction and no change in assumptions, the initial analysis based on worst-case replenishment criteria set forth in the transaction legal documents was applied.

Other methodologies referenced in this transaction are listed at the end of this press release. This may be found on www.dbrs.com at http://www.dbrs.com/about/methodologies.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include investor reports and data provided by SANTANDER DE TITULIZACION, S.G.F.T, S.A. and European DataWarehouse, respectively.

DBRS does not rely on third party due diligence in order to conduct its analysis.

DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

This is the first rating action since the Initial Rating Date. The lead responsibilities for this transaction have been transferred to Antonio Di Marco.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of the changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (the Base Case):

-- DBRS expected a base case probability of default (PD) and loss given default (LGD) for the pool based on a review of the transaction performance. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.

-- The base case PD and LGD of the current pool of receivables are 4.87% and 50.59%, respectively.

-- The Risk Sensitivity overview below illustrates the ratings expected for the Class A, Class B, Class C and Class D notes if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating for the Class A notes would be expected to remain at A (sf), all else being equal. If the PD increases by 50%, the rating for the Class A notes would be expected to remain at A (sf), all else being equal. If both the LGD and PD increase by 50%, the rating of the Class A notes would be expected to be downgraded to BBB (sf), all else being equal.

Class A Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (sf).
-- 50% increase in LGD, expected rating of A (sf).
-- 25% increase in PD, expected rating of A (sf).
-- 50% increase in PD, expected rating of A (sf).
-- 25% increase in LGD and 25% increase in PD, expected rating of A (sf).
-- 25% increase in LGD and 50% increase in PD, expected rating of A (low) (sf).
-- 50% increase in LGD and 25% increase in PD, expected rating of A (low) (sf).
-- 50% increase in LGD and 50% increase in PD, expected rating of BBB (sf).

Class B Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (sf).
-- 50% increase in LGD, expected rating of BBB (sf).
-- 25% increase in PD, expected rating of BBB (sf).
-- 50% increase in PD, expected rating of BBB (sf).
-- 25% increase in LGD and 25% increase in PD, expected rating of BBB (sf).
-- 25% increase in LGD and 50% increase in PD, expected rating of BBB (sf).
-- 50% increase in LGD and 25% increase in PD, expected rating of BBB (sf).
-- 50% increase in LGD and 50% increase in PD, expected rating of BB (high) (sf).

Class C Risk Sensitivity:
-- 25% increase in LGD, expected rating of BB (low) (sf).
-- 50% increase in LGD, expected rating of BB (low) (sf).
-- 25% increase in PD, expected rating of BB (low) (sf).
-- 50% increase in PD, expected rating of BB (low) (sf).
-- 25% increase in LGD and 25% increase in PD, expected rating of BB (low) (sf).
-- 25% increase in LGD and 50% increase in PD, expected rating of BB (low) (sf).
-- 50% increase in LGD and 25% increase in PD, expected rating of BB (low) (sf).
-- 50% increase in LGD and 50% increase in PD, expected rating of BB (low) (sf).

Class D Risk Sensitivity:
-- 25% increase in LGD, expected rating of B (low) (sf).
-- 50% increase in LGD, expected rating of B (low) (sf).
-- 25% increase in PD, expected rating of B (low) (sf).
-- 50% increase in PD, expected rating of B (low) (sf).
-- 25% increase in LGD and 25% increase in PD, expected rating of B (low) (sf).
-- 25% increase in LGD and 50% increase in PD, expected rating of B (low) (sf).
-- 50% increase in LGD and 25% increase in PD, expected rating of B (low) (sf).
-- 50% increase in LGD and 50% increase in PD, expected rating of B (low) (sf).

For further information on DBRS historic default rates published by the European Securities and Markets Administration (ESMA) in a central repository, see http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: David Sanchez Rodriguez
Initial Rating Date: 28 November 2014
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Antonio Di Marco
Rating Committee Chair: Diana Turner

DBRS Ratings Limited
1 Minster Court, 10th Floor Mincing Lane, London EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

The rating methodologies used in the analysis of this transaction can be found at http://www.dbrs.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Unified Interest Rate Model for European Securitisations
-- Rating European Consumer and Commercial Asset-Backed Securitisations

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