Santander Consumer Bank AG can trace its origins back to 1957, and since it was bought by Santander in 1987 has grown to become the largest non-captive consumer bank in Germany with a €50.1bn balance sheet, 3.9m customers and 209 branches.
Its history in the securitization market also goes back a long way, to 1997 when it started issuing private deals. In 2006 it issued its first public deal from its flagship auto programme, SCGA. SCB added a third pillar in 2008, its SGCM platform for retained securitizations of auto, consumer and vehicles collateral, for which it put in place a new €5bn programme in 2020. And a fourth pillar emerged in 2015 as it started issuing capital relief securitizations, of which it sold significant risk transfer (SRT) deals once a year through to 2018, before moving in 2019 to a synthetic structure.
The bank turned its attention to a full-stack transaction in 2020, allowing it to reap greater capital benefits as well as funding, and knowing that investors would welcome an opportunity to buy a German consumer loans deal. Covid-19, however, made things more complicated.
“The transaction work started during the peak of the first wave in the Covid-19 pandemic,” says Robert Westermann, head of ABS structuring. “The combination of adjustment of the rating agency methodology due to Covid-19, high prepayment rates, excess spread, pro rata amortisation, revolving period and uncertain coupons made structuring the first German consumer cap stack a very demanding process and it was only possible with a committed and experienced deal team.”
The resulting €1.8bn SCGC 20-1 transactions was one of the largest public securitizations in Europe during the year and the largest cash risk transfer deal in the ABS market.
Investors leapt at the chance to buy it.
“A first German public consumer loans ABS, large size and offering full cap stack during the Covid-19 pandemic was probably something not many market participants expected,” says head of securitization, Tomasz Osipowicz. “Although this public placement involved an element of price discovery, we were of the opinion that an offering of this type would be welcomed by the market, considering our bank’s proven performance over the years and issuer track record.”
The deal was comprised of classes ‘A’ through to ‘G’, while a €40.5m equity tranche was pre-placed via bookbuilding syndication. The public bookbuild for the remaining tranches started on October 12 with initial price thoughts and when the first update came on October 14, it was clear that investors had the appetite for the €1.4bn being offered – and particularly so with the subordinated classes.
The books grew steadily and with a status of 1.4 times (class A), 2.2 times (class B), 4.3 times (class C), 6.4 times (class D), 1.9 times (class E) and 4.6 times (class F), the deal was upsized to €1.8bn.
By the late evening, on the increased deal size, subscriptions levels ranged from 1.2 times on the senior notes to 5.2 times on the class ‘D’ notes. Final guidance saw pricing set on the senior notes, and ranges set, all inside IPTs and most inside that morning’s guidance, on the rest of the stack. The deal was priced the following day at the tight end of those ranges.
“The market reception, subscription levels and 40 high-quality investors participating in our deal across the tranches confirmed our thoughts, and the demand we saw for the transaction only encourages us in our further issuance plans,” says Osipowicz. “As a repeat issuer we are committed to the market and our investors.”
For Andreas Glaser, CFO Santander Consumer Bank AG, winning the two awards reflects the hard work of the team.
“We are delighted to have won two awards: best deal of the year as well as the ABS issuer of the year 2020,” he says. “The latter underlines the great team spirit we have within the bank and within our teams. ABS issuances will remain a key strategic instrument to steer both: liquidity and capital of the bank.”