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

DBRS Ratings Limited (DBRS) took the following rating actions on the bonds issued by Santander Consumer Auto Spain 2014-1 (the Issuer):

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

The rating actions follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies and defaults, as of September 2017.
-- Portfolio default (PD) rate, loss given default and expected loss assumptions for the remaining collateral pool.
-- Current available credit enhancement to the Class A, Class B, Class C, Class D and Class E Notes to cover the expected losses at their current rating levels.
-- Given the transaction is still in its revolving period, no early amortisation events have occurred.

FTA Santander Consumer Spain Auto 2014-1 is a securitisation of a portfolio of auto loan receivables issued in Spain and originated and serviced by Santander Consumer E.F.C., S.A. (SCF).

PORTFOLIO PERFORMANCE, ASSUMPTIONS AND REVOLVING PERIOD
The transaction is still in its four-year revolving period during which time the Issuer may purchase additional receivables, scheduled to end in December 2018. There are concentration limits and portfolio tests in place to mitigate any potential deterioration. To date, all of them have been met. The upgrade on the Class C and Class D Notes is driven by an updated worst-case portfolio composition, given that the transaction has now seasoned substantially and the revolving period will only persist for one additional year.

As of the September 2017 payment date, the 90+ delinquency ratio was at 0.7%, up from 0.5% the previous year. Cumulative net losses were at 0.2%. DBRS has maintained its base case PD and LGD assumptions at 11.69% and 49.70%, respectively.

CREDIT ENHANCEMENT
As at the September 2017 payment date, credit enhancement to the Class A Notes stood at 12.0%, consisting of subordination of the Class B, Class C and Class D Notes, and the reserve fund. Class B credit enhancement was at 8.9%, consisting of subordination of the Class C and Class D Notes and the reserve fund. Class C credit enhancement was at 6.9%, consisting of subordination of the Class D Notes and the reserve fund. Class D credit enhancement was at 5.0%, consisting solely of the reserve fund.

The reserve fund 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 reserve fund 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. is 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 to the ratings is: Master European Structured Finance 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. Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

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” at: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/

The sources of data and information used for this rating include investor reports provided by Santander de Titulizacion, S.G.F.T, S.A.

DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating was not supplied with third-party assessments. However, this did not impact the rating analysis.

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

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on this transaction took place on 21 November 2016 when DBRS confirmed the ratings on the Class A, B, C, D and E Notes at A (sf), BBB (sf), BB (low) (sf), B (low) (sf) and C (sf), respectively.

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 to 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 (low) (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 (low) (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 B (low) (sf).

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

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

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

Lead Analyst: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Vito Natale, 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 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

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