DBRS Morningstar Takes Rating Actions on FTA Santander Consumer Spain Auto 2014-1

DBRS Ratings GmbH (DBRS Morningstar) took the following rating actions on the notes issued by FTA Santander Consumer Spain Auto 2014-1 (the Issuer):

-- Class A Notes upgraded to A (high) (sf) from A (sf)
-- Class B Notes upgraded to A (high) (sf) from BBB (sf)
-- Class C Notes upgraded to A (low) (sf) from BB (sf)
-- Class D Notes upgraded to BBB (sf) from B (sf)
-- Class E Notes confirmed 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 in June 2032. 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, defaults and losses as of the September 2019 payment date.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- 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 Morningstar’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.

The Issuer is a securitisation of Spanish auto loan receivables originated and serviced by Santander Consumer E.F.C., S.A. The transaction closed in November 2014 with an initial portfolio of EUR 760.0 million and included a four-year revolving period, which ended in December 2018, during which additional receivables totaling EUR 1.13 billion were purchased. As of the September 2019 payment date, the portfolio has amortised to EUR 548.0 million, consisting of 79.4% new auto loans and 20.6% used auto loans, of which 96.9% are to private individuals and 3.1% are to corporate borrowers.

PORTFOLIO PERFORMANCE
As of the September 2019 payment date, loans 30-to-60 days and 60-to-90 days in arrears represented 1.0% and 0.6% of the outstanding portfolio balance, while loans greater than 90 days in arrears represented 1.4%. Gross cumulative defaults amounted to 0.75% of the aggregate initial portfolios balance, of which 25.5% has been recovered to date.

PORTFOLIO ASSUMPTIONS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions to 11.4% and 49.2%, respectively.

CREDIT ENHANCEMENT
As of the September 2019 payment date, credit enhancement to the Class A, B, C and D Notes increased to 17.3%, 12.3%, 9.6% and 6.9% from 12.5%, 8.9%, 6.9% and 5.0%, respectively, at the last annual surveillance review. The increases reflect the start of amortisation of the notes following the end of the revolving period in December 2018.
The transaction benefits from a reserve fund, funded at closing through the issuance of the Class E Notes, available to cover senior fees, interest and principal on the Class A, Class B, Class C and Class D Notes. The reserve is permitted to amortise once four years have passed since the end of the revolving period. The reserve is currently at its target level of EUR 38 million. The transaction structure additionally provisions for a liquidity reserve and a commingling reserve, which will be funded upon the breach of certain triggers.

Santander Consumer Finance S.A. acts as the account bank for the transaction. Based on the DBRS Morningstar private rating of Santander Consumer Finance S.A., the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the ratings assigned to the notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

The transaction structure was analysed in Intex DealMaker.

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 Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

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 “Global Methodology for Rating Sovereign Governments” at: https://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include investor and servicer reports provided by Santander de Titulización, S.G.F.T., S.A. (the Management Company) and loan-level data provided by the European DataWarehouse GmbH.

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

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

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS Morningstar 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 2018, when DBRS Morningstar confirmed the ratings of the Class A, Class B, Class C, Class D and Class E Notes at A (sf), BBB (sf), BB (sf), B (sf) and C (sf), respectively.

The lead analyst responsibilities for this transaction have been transferred to Daniel Rakhamimov.

Information regarding DBRS Morningstar 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 Morningstar considered the following stress scenarios as compared with the parameters used to determine the rating (the Base Case):

-- DBRS Morningstar 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 loans for the Issuer are 11.4% and 49.2%, 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 decrease to A (sf), ceteris paribus. If the PD increases by 50%, the rating of the Class A Notes would be expected to decrease to A (low) (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to decrease to BBB (low) (sf).

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

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

Class D 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 (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)

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

For further information on DBRS Morningstar 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 GmbH are subject to EU and US regulations only.

Lead Analyst: Daniel Rakhamimov, Senior Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 21 November 2014

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main Deutschland

Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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 Morningstar 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.