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

DBRS Ratings Limited (DBRS) confirmed 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 (sf)
-- Class D Notes at B (sf)
-- Class E Notes at C (sf)

The rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date. The ratings on the Class B Notes, Class C Notes, Class D Notes and Class E Notes address the ultimate payment of interest and principal on or before the legal final maturity date.

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 2018.
-- Portfolio default (PD) rate, loss given default and expected loss assumptions for the collateral pool.
-- Given the transaction is still in its revolving period, no early amortisation events have occurred.
-- Current available credit enhancement to the Class A, Class B, Class C and Class D Notes to cover the expected losses at their current rating levels.
-- The rating of the Class E Notes is based on DBRS’s review of the following considerations: (1) the 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.

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.

PORTFOLIO PERFORMANCE, ASSUMPTIONS AND REVOLVING PERIOD
The transaction is still in its four-year revolving period, which is scheduled to end in December 2018. During this period, 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 September 2018, two- to three-month arrears represented 0.5% of the outstanding portfolio balance, up from 0.4% in September 2017. As of September 2018, the 90+ delinquency ratio was 0.9%, up from 0.7% the previous year. As of September 2018, the cumulative loss ratio was 0.3%. DBRS has updated its base case PD and loss given default (LGD) assumptions to 12.00% and 50.47%, respectively.

CREDIT ENHANCEMENT
As of the September 2018 payment date, credit enhancement to the Class A, B, C and D Notes was 12.5%, 8.9%, 6.9% and 5.0%, respectively. All credit enhancement has been stable since the DBRS initial rating because of the transaction revolving period ending in December 2018.

The transaction benefits from a Reserve Fund funded through the issuance of the Class E Notes that 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 the account bank is consistent with the Minimum Institution Rating, given the rating assigned to 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 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. 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 “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: http://dbrs.com/research/319564/rating-sovereign-governments.pdf.

The sources of data and information used for these ratings 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, DBRS 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 these ratings 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 2017 when DBRS confirmed its ratings on the Class A, B and E Notes at A (sf), BBB (sf), and C (sf), respectively, and upgraded the Class C and D Notes to BB (sf) and B (sf), respectively.

The lead analyst responsibilities for this transaction have been transferred to Joana Seara da Costa.

Information regarding DBRS ratings, including definitions, policies and methodologies is available at 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 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 12.0% and 50.5%, 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 (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 (sf).

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

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

The Class E Notes rating would not be affected by a hypothetical change in either the PD or LGD.

For further information on DBRS historic 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: Joana Seara de Costa, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 21 November 2014

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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
-- 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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.