Research: Rating Action: Moody’s Assigns Final Ratings to Santander Bank Auto Credit Linked Notes, Series 2022-B

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New York, September 30, 2022 — Moody’s Investors Service (“Moody’s”) has assigned final ratings to Santander Bank Auto Credit-Linked Notes, Series 2022-B (SBCLN 2022-B) issued by Santander Bank, NA (SBNA ) .

SBCLN 2022-B is the second credit-linked note transaction issued by SBNA in 2022 to transfer credit risk to noteholders through a hypothetical tranched financial guarantee against a benchmark pool of auto loans.

The full rating actions are as follows:

Issuer/Transaction: Santander Bank, NA/Santander Bank Auto Credit-Linked Notes, Series 2022-B

$17,500,000, 5.587%, Class A-2 Notes, final rating assigned Aaa (sf)

$122,500,000, 5.721%, Class B Notes, final rating assigned Aa2 (sf)

$70,000,000, 5.916%, Class C Notes, Final Rating Assigned A2 (sf)

$59,500,000, 6.793%, Class D Notes, Final Rating Assigned Baa2 (sf)

$26,250,000, 8.681%, Class E Notes, final rating assigned Ba2 (sf)

$49,000,000, 11.910%, Class F Notes, Final Rating Assigned B2 (sf)

RATINGS RATIONALE

Rated bonds are fixed rate bonds secured by a cash collateral account. This transaction is unique in that the source of principal payments for the Notes will be a cash collateral account held by a depository institution rated A2 or P-1 by Moody’s, initially Citibank, NA. SBNA will pay the principal in the unlikely event that the cash collateral account does not have sufficient funds. The transaction also benefits from a letter of credit provided by a depository institution rated A2 or P-1 by Moody’s, initially JPMorgan Chase Bank, NA. The letter of credit is sized to cover up to five months of interest in the event of default by Santander Bank, NA or as a result of a conservator or FDIC receivership. As a result, rated ratings are not capped by Santander Bank, NA’s LT Issuer rating (Baa1).

The credit risk exposure of the Notes depends on the actual realized losses incurred by the Reference Portfolio. This transaction has a modified pro rata structure, which is more beneficial to subordinated bondholders than the typical sequential payment structure for auto loan transactions in the United States. However, subordinated bondholders will not receive any principal unless the performance tests are satisfied.

Ratings are based on the quality of the underlying collateral and its expected performance, the strength of the capital structure, and Santander Consumer USA Inc.’s experience and expertise as a servicer.

Moody’s median cumulative net loss expectation for the 2022-B reference pool is 2.00% and a loss at Aaa stress of 8.00%. Moody’s based its cumulative net loss expectation on an analysis of the credit quality of the underlying collateral; historical performance of similar collateral, including securitization performance and managed portfolio performance; Santander Consumer USA Inc.’s ability to perform the service functions; and current expectations regarding the macroeconomic environment during the term of the transaction.

At closing, Class A-2, B, Class C, Class D, Class E and Class F notes enjoy 12.00%, 8.50%, 6.50%, 4.80% , 4.05% and 2.65% firm credit enhancement. , respectively. Hard Credit Enhancement for Notes consists of subordination.

MAIN METHODOLOGY

The main methodology used in these ratings was “Moody’s Global Approach to Rating Auto Loan- and Lease-Backed ABS” published in July 2022 and available at https://ratings.moodys.com/api/rmc-documents/390478. Otherwise, please see the Scoring Methodologies page on https://ratings.moodys.com for a copy of this methodology.

Factors that would lead to an upgrade or downgrade of ratings:

At the top

Moody’s may upgrade Class B, Class C, Class D, Class E and Class F notes if credit enhancement levels are higher than necessary to protect investors against current expectations of portfolio losses . Losses could decline from Moody’s original expectations due to fewer debtor defaults or appreciation in the value of vehicles securing a debtor’s promise to pay. Portfolio losses are also highly dependent on the US labor market and the used vehicle market. Other reasons for better-than-expected performance include changes to service practices that improve collections or refinancing opportunities that result in early payments.

Down

Moody’s may downgrade the ratings if, given current expectations of portfolio losses, levels of credit enhancement are consistent with lower ratings. Credit enhancement may decrease if realized losses reduce available subordination. Moody’s expectations of pool losses could increase due to a higher number of debtor defaults or deterioration in the value of vehicles securing a debtor’s promise to pay. Portfolio losses are also highly dependent on the US labor market, the used vehicle market and poor maintenance. Other reasons for below-expected performance include errors on the part of trading parties, inadequate governance of transactions, and fraud.

REGULATORY INFORMATION

For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Moody’s rating symbols and definitions can be found at https://ratings.moodys.com/rating-definitions.

The analysis includes an evaluation of collateral characteristics and performance to determine expected collateral loss or a range of collateral losses or expected cash flows for rated instruments. Second, Moody’s estimates collateral losses or expected cash flows using a quantitative tool that takes into account credit enhancement, loss distribution and other structural characteristics, to derive the loss expected for each scored instrument.

Moody’s quantitative analysis involves an evaluation of scenarios that focus on factors contributing to rating sensitivity and consider the likelihood of material collateral losses or impaired cash flows. Moody’s weights the impact on rated instruments based on its assumptions of the likelihood of events in such scenarios occurring.

For ratings issued on a program, series, category/class of debt or security, this announcement provides certain regulatory information regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or under a program for which ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a media provider, this announcement provides certain regulatory information relating to the credit rating action on the media provider and each particular credit rating action for securities whose credit ratings are derived from the support provider’s credit rating. For the provisional ratings, this press release provides certain regulatory information relating to the provisional rating assigned, and to a final rating that may be assigned after the final issuance of the debt, in each case where the structure and conditions of the transaction n have not changed prior to the final rating being assigned in a way that would have affected the rating. For more information, please see the issuer/transaction page of the respective issuer at https://ratings.moodys.com.

For all relevant securities or rated entities receiving direct credit support from the lead entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action , the associated regulatory information will be that of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to the jurisdiction: Ancillary services, Disclosures to the rated entity, Disclosures to be provided by the rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued without modification as a result of such disclosure.

These notes are solicited. Please refer to Moody’s Policy for the Designation and Assignment of Unsolicited Credit Ratings available on its website. https://ratings.moodys.com.

The regulatory information contained in this press release applies to the credit rating and, if applicable, the outlook or rating revision relating thereto.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis are available at https://ratings.moodys.com/documents/PBC_1288235.

The worldwide credit rating on this credit rating announcement was issued by one of Moody’s affiliates outside the EU and is approved by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main. -le-Main 60322, Germany, in accordance with Article 4(3) of Regulation (EC) No 1060/2009 on credit rating agencies. Further information on the EU approval status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the UK and is approved by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the United Kingdom. . Further information on the UK endorsement status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and Moody’s legal entity that issued the rating.

Please see the issuer/transaction page at https://ratings.moodys.com for additional regulatory information for each credit rating.

Wendy Rosenfeld
Vice President – Senior Analyst
Structured Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

Daniela Jayesuria
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

Release Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

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