Jan 9 (IFR) - Santander Consumer USA on Wednesday led the
charge for the subprime auto ABS sector by pricing the first
such ABS in 2013 - a US$1.25bn trade - at levels much tighter
than recent transactions despite adopting a more aggressive
Santander is a regular issuer of subprime auto ABS in the US
securitisation market, and being a programmatic issuer clearly
helped its latest transaction.
Popularity and confidence in the name was so much that even
though Santander included pre-funding in the structure for the
first time since 2007, it did not hurt investor interest.
A presence of a pre-funding account means additional risk to
an ABS, because funds in this account would be used to purchase
additional collateral during a post-closing period. The risk is
that new auto loans delivered to the trust could be poorer in
credit quality versus those already in the pool.
"Pre-funding introduces ambiguity to collateral
characteristics and cash flow timing," said Fitch in their
report on the deal.
An S&P presale report said the agency expected the Santander
DART 2013-1 transaction to experience cumulative net losses in
the 13.50%-14.50% range - slightly higher than the agency's own
13.25%-14.25% loss range for SDART 2012-A, due to a lower
internal credit score.
"Our expected loss also accounts for the impact of using
pre-funding in this transaction," the S&P report said.
"On the closing date, approximately US$202.85m of the
proceeds from the sale of the notes will be deposited into a
These funds will be used to acquire receivables by February
28 2013 of about US$221.69m, which amounted to 15.7% of the
total pool balance.
Yet bankers said investors were comfortable with the
transaction despite the pre-funding account.
"With the tight funding window and rigorous restrictions in
place for subsequent collateral additions, investors were
comfortable with the re-emergence of the pre-funding account,"
said Jay Steiner, head of banking and origination, structured
credit in the Americas, at Deutsche Bank.
Under the structure, more receivables cannot be acquired
through the pre-funding account if the effect of such
acquisition would reduce the weighted average contract rate of
all subsequent receivables to less than 16.73%; cut the weighted
average loss forecasting score to less than 561; increase the
weighted average LTV ratio to more than 116.02%; cut the
weighted average FICO score to less than 590; or increase the
weighted average remaining term to maturity to greater than
The deal was hugely successful, attracting huge investor
demand despite pricing at one of the tightest levels Santander
has achieved in the post-crisis era by Santander.
"2013 has picked up where 2012 left off, with an
oversubscribed and very broadly distributed transaction,"
The weighted average spread on the latest Santander deal
down through the Triple Bs was approximately 81bp, while the
weighted average yield was 1.29%.
As a comparable, the 2012-1 series that priced a year ago
had a weighted average spread of approximately 224bp and yield
of 2.92%. Santander's 2012-6, which priced in October, had a
weighted average spread of 109bp and yield of 1.52%.
The short-term money market class was priced at a yield of
0.26% and was bought by roughly a dozen investors. It was 2.7
The Triple A rated 0.85-year slice was talked at EDSF plus
20bp-23bp, before tightening at pricing to plus 18bp. The
tranche was 3.5 times oversubscribed, and was purchased by about
two dozen investor groups.
The Triple A rated 1.91-year note and the Double A rated
2.74-year note were printed at EDSF plus 25bp and interpolated
swaps plus 70bp. Guidance levels were seen at 80bp area and
130bp area, respectively. Both tranches were purchased by nearly
a dozen investors and were 2.8 times oversubscribed.
The Single A rated 3.44-year class was priced at
interpolated swaps plus 120bp and was roughly 3.5 times
oversubscribed, while the Triple B rated four-year slice was
stamped at interpolated swaps plus 160bp and was a whopping 7.5
times oversubscribed. The four year Double Bs were retained by
the issuer, but are likely to be sold at a later date. Citigroup
(structuring lead) and Deutsche Bank were joint bookrunners.