Santander is preparing to price its first auto lease ABS transaction sponsored by its American banking subsidiary Santander Bank NA, looking to raise over $1.16bn.
Previously, all of Santander Retail Auto Least Trust’s transactions have been sponsored by Santander Consumer USA. But, as more emphasis is placed on bank liquidity and lenders deal with more onerous capital requirements, Santander is expected to utilize the ABS market for balance sheet relief.
“Going forward, we expect SBNA to be a more programmatic issuer, probably one to two deals a year,” an ABS syndicate banker close to the deal told GlobalCapital.
Bank of America has already taken this step, returning to the ABS market for the first time in 11 years with a $914m prime auto loan deal back in July. And the US bank has another auto deal in the pipeline.
Under Basel III endgame regulations issued in July, banks will need to increase the capital they hold against certain assets. Securitization is one of the best ways for many banks to clear loans from their balance sheets, and the proposal will likely lead to a change in banks’ utilization of securitization, according to a head of ABS syndicate at a bank.
While declining bank deposits play a role in banks considering alternative funding sources, auto ABS is also an easy way for banks to liquidate assets.
"Many banks have other loans that are much more under water, and auto loans tend to be shorter duration," the first banker said. “Auto loans are an easier, cheaper way to liquidate some of the loan books compared to selling commercial exposures or longer dated mortgages.”
Santander’s upcoming deal, SBALT 2023-A, is expected to offer seven classes of notes. The class ‘A-1’ notes obtained an F1+ rating from Fitch while the class ‘A-2’, ‘A-3’ and ‘A-4’ notes were all rated AAA.
The class ‘B’ notes received an AA rating, the class ‘C’ notes A and the class ‘D’ notes BBB-.
The notes are backed by two exchange notes, each collateralized by leases on various brands of new vehicles primarily manufactured by Stellantis, according to Fitch’s pre-sale report.
RBC is the structuring lead for the deal, with Santander acting as a joint lead.