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

DBRS Ratings Limited (DBRS) has today confirmed the ratings the bonds issued by FTA Santander Consumer Spain Auto 2014-1 (the Issuer) as follows:
-- Class A Notes at A (sf)
-- Class B Notes at BBB (sf)
-- Class C Notes at BB (low) (sf)
-- Class D Notes at B (low) (sf)
-- Class E Notes at C (sf)

The confirmations of the ratings are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies and defaults, as of September 2016.
-- Updated portfolio default rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- Current available credit enhancement to the Class A, Class B, Class C and Class D Notes to cover the expected losses at their respective rating levels.
-- The rating of the Class E Notes is based on DBRS’s review of the following considerations: (1) Class E Notes are in the first-loss position and, as such, are highly likely to default, and (2) given the characteristics of the Class E Notes as defined in the transaction documents, the default most likely would only be recognised at the maturity or early termination of the transaction.

The rating of the Class A Notes addresses the timely payment of interest and full payment of principal by the legal final maturity date in accordance with the terms and conditions of the notes. The ratings of the Class B, Class C, Class D and Class E Notes address the ultimate payment of interest and ultimate payment of principal by the legal final maturity date in accordance with the terms and conditions of the notes.

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 used the proceeds of the Class A, Class B, Class C and Class D Notes to purchase the EUR 760 million portfolio. The fund also issued the Class E Notes to fund the EUR 38 million Reserve Fund (RF). The portfolio is serviced by SCF. The transaction is still in its four-year revolving period during which the Issuer may purchase additional receivables. There are concentration limits and portfolio tests in place to mitigate any potential deterioration. To date, all of them have been met.

As of the September 2016 payment date, the 90+ delinquency ratio is 0.51%, up from 0.26% the previous year. Cumulative net losses are currently at 0.11%.

As at the September 2016 payment date, credit enhancement to the Class A Notes stands at 12.5% and consists of subordination of the Class B, Class C and Class D Notes and the RF. Class B credit enhancement stands at 8.9% and consists of subordination of the Class C and Class D Notes and the RF. Class C credit enhancement stands at 6.9% and consists of subordination of the Class D Notes and the RF. Class D credit enhancement stands at 5.0% and consists of the RF.

The RF covers senior fees, interest and principal on the Class A, Class B, Class C and Class D Notes, and is permitted to amortise once certain conditions have been met. The RF is currently at its target level of EUR 38 million. The transaction includes a liquidity reserve and commingling reserve that will be made available upon the breach of certain triggers.

Santander Consumer Finance S.A. serves as the account bank for the transaction. The DBRS private rating of Santander Consumer Finance S.A. complies with the Minimum Institution Rating given the rating of the Class A Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is the Master European Structured Finance Surveillance Methodology.

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. However, due to the inclusion of a revolving period in the transaction, the initial analysis based on the worst-case replenishment criteria set forth in the transaction legal documents was assumed.

DBRS has conducted a review of an amendment to the Deed of Incorporation of the fund, signed on 16 December 2015. The other transaction legal documents have remained unchanged since the most recent rating action, and were not reviewed.

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

These 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 Titulización S.G.F.T, S.A. and the European DataWarehouse GmbH.

DBRS does not rely upon 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 to be 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.

The last rating action on this transaction took place on 26 November 2015 when DBRS confirmed the ratings on all the Notes.

The lead responsibilities for this transaction have been transferred to Andrew Lynch.

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

To assess the impact of 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 lifetime base case probability of default (PD) and LGD for the pool based on a review of the current assets. 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 mortgages for the Issuer are 11.69% and 49.70%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected 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 of the Class A Notes would be expected to fall to BBB (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to fall to BBB (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to fall to BB (low) (sf).

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

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

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

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

For further information on DBRS historical default rates published by the European Securities and Markets Authority (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.

Lead Surveillance Analyst: Andrew Lynch, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Senior Vice President
Initial Rating Date: 21 November 2014

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960

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

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