Drive Auto Receivables Trust

Transcription

1 Presale: Drive Auto Receivables Trust This presale report is based on information as of July 20, The ratings shown are preliminary. This report does not constitute a recommendation to buy, hold, or sell securities. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. Preliminary Ratings Class Preliminary rating(i) Type Interest rate(ii) Preliminary amount (mil. $)(ii) Legal final maturity date A-1 A-1+ (sf) Senior Fixed Aug. 15, 2018 A-2-A AAA (sf) Senior Fixed Aug. 15, 2019 A-2-B AAA (sf) Senior Float Aug. 15, 2019 A-3 AAA (sf) Senior Fixed June 15, 2020 B AA (sf) Subordinate Fixed June 15, 2021 C A (sf) Subordinate Fixed Sept. 15, 2023 D BBB (sf) Subordinate Fixed Sept. 15, 2023 E BB (sf) Subordinate Fixed Nov. 15, 2024 (i)the rating on each class of securities is preliminary and subject to change at any time. (ii)the tranches' coupons and sizing will be determined on the pricing date. Profile Expected closing date July 31, Collateral Originator, sponsor, servicer, and seller Structuring lead manager Indenture trustee Owner trustee Subprime auto loan receivables. Santander Consumer USA Inc., a subsidiary of Santander Holdings U.S.A. Inc. (BBB+/Stable/A-2; formerly known as Sovereign Bancorp). J.P. Morgan Securities LLC. Wilmington Trust N.A. (A/Stable/A-1). Wells Fargo Delaware Trust Co. N.A. Primary Credit Analyst: Amy S Martin, New York (1) ; amy.martin@spglobal.com Secondary Contact: Jenna Cilento, New York (1) ; jenna.cilento@spglobal.com See complete contact list on last page(s) JULY 20,

2 Credit Enhancement Summary B 2017-A 2016-C 2016-B 2016-A 2015-D 2015-C 2015-B Subordination (% of the initial receivables)(i) Class A Class B Class C Class D Class E N/A N/A N/A N/A N/A Overcollateralization Initial (% of initial receivables) Target(ii) Floor (% of initial receivables) Reserve fund (% of the initial receivables) Initial Target Floor Total initial hard credit enhancement (% of the initial receivables) Class A Class B Class C Class D Class E N/A N/A N/A N/A N/A Excess spread per year (estimated %) (iii) (i)principal on the preliminary rated notes will be paid sequentially. Class A refers collectively to the class A-1, A-2, and A-3 notes. (ii)the overcollateralization target amount will be equal to the sum of 35.50% of the current pool balance and 1.50% of the initial pool balance for 2017-A and 29.50% of the current pool balance and 2.50% of the initial pool balance for 2017-B and 30.20% of the current pool balance and 2.50% of the initial pool balance for and The target overcollateralization amount will increase to the sum of 45.50% of the current pool balance and 1.50% of the initial pool balance for 2017-A; 39.50% of the current pool balance and 2.50% of the initial pool balance for 2017-B; 40.20% of the current pool balance and 2.50% of the initial pool balance for and The CNL triggers are tested monthly and are not curable once breached. (iii)includes the 4.0% servicing fee. --Drive Auto Receivables Trust. N/A--Not applicable. Rationale The preliminary ratings assigned to Drive Auto Receivables Trust 's ( 's) $ billion automobile receivables-backed notes series reflect: The availability of 65.9%, 59.3%, 48.9%, 39.1% and 36.4% of credit support for the class A (consisting of classes A-1, A-2, and A-3), B, C, D, and E notes, respectively, based on stressed cash flow scenarios (including excess spread), which provide coverage of more than 2.35x, 2.10x, 1.70x, 1.35x, and 1.25x for our 27.00%-28.00% expected cumulative net loss (CNL; see the Cash Flow Modeling section for more information). These break-even scenarios cover total cumulative gross defaults of 94%, 85%, 70%, 60% and 56%, respectively. JULY 20,

3 The timely interest and principal payments made under stressed cash flow modeling scenarios are appropriate to the assigned preliminary ratings. The expectation that under a moderate ('BBB') stress scenario (1.35x our expected loss level), all else being equal, our ratings on the class A and B notes ('AAA (sf)' and 'AA (sf)', respectively) will remain at the assigned preliminary ratings, our rating on the class C notes ('A (sf)') will remain within one category of the assigned preliminary rating, and our rating on the class D notes ('BBB (sf)') will remain within two rating categories of the assigned preliminary rating while they are outstanding. The class E 'BB (sf)' rated notes will remain within two rating categories of the assigned preliminary rating during the first year, but will eventually default under the 'BBB' stress scenario, after having received 46%-90% of their principal. These rating movements are within the limits specified by our credit stability criteria (see "Methodology: Credit Stability Criteria," published May 3, 2010). The originator/servicer's history in the subprime/specialty auto finance business. Our analysis of 10 years of static pool data on Santander Consumer USA Inc.'s (SC's) lending programs. The transaction's payment/credit enhancement and legal structures. Significant Changes From And 2017-B The structural and credit enhancement features remain the same as for the series transaction. However, the deal, similar to , includes the following important changes relative to 2017-B and prior transactions: The class A through D notes will be registered with the Securities and Exchange Commission (SEC); whereas, 2017-B and earlier transactions were 144A transactions. The representation that all contracts either have or will have made their first two payments is included; whereas, it was not included for 2017-B and prior deals. In our opinion, the significant collateral changes from include: The non-zero weighted average FICO score of the pool decreased slightly to from However, the weighted average loss forecasting score (LFS) for the pool, which takes into account both credit and loan structure attributes, increased to 477 from 468; and the percentage with an LFS of less than 450 decreased to approximately 34.5% (compared with 38.1% for ). The percentage with an LFS greater than 501 increased to 31.33% from 18.36% The new vehicle percentage increased to 39.9% from 24.1%. The weighted average loan-to-value (LTV) ratio decreased to 106.3% from 108.6%. The percentage of longer-term loans (73-75 months) increased to 15.55% from 0.54%. Within these loans, the LFS score increased to from , the LTV decreased to 94.40% from %, and the FICO score decreased to from Since this is 's second transaction requiring loan-level reporting, we have additional information on the degree of income verification on the loans in the pool. The percentage of loans (based on loan count) with proof of income (POI) is approximately 15%. While this might appear low for a securitized subprime pool, the company uses various risk identifiers, including credit history, deal structure, dealer risk, and other factors, to determine when POI is warranted. Also, the loans whose obligors had their incomes verified have substantially lower FICOs (550 versus 571) and higher LTVs (108.99% versus %) than those who did not have their incomes verified. The pool seasoning declined to two months from three months. On balance, based on the pool characteristics, we believe this current pool is comparable to , and we are maintaining our expected CNL range for this transaction (see the S&P Global Ratings' Expected Loss section) at JULY 20,

4 27.00%-28.00%. Key Rating Considerations We considered the following key strengths in rating this transaction: SC, the originator/servicer of the assets, is owned by Santander Holdings U.S.A. Inc. (BBB+/Stable/A-2). Further, we consider SHUSA a highly strategic subsidiary of Banco Santander S.A. (A-/Stable/A-2) that would receive support from its parent, which owns 100% of SHUSA, if needed (see "How Worsening Auto Finance Conditions Could Affect Banks, Nonbank Finance Companies, And Captive Finance Companies," published May 8, 2017). SC has a long track record of originating and securitizing subprime auto loans. SC's key officers have many years' experience in the auto business. SC has generally repurchased contracts from its securitized pools that have not made their first two payments; and beginning with this transaction, they've added a representation that each contract has or will have made their first two payments. If not, they will repurchase those contracts. For outstanding S&P Global Ratings-rated transactions that have at least 12 months of performance, these repurchases range between 200 and 490 basis points (bps) per transaction. There is a CNL trigger that increases the target overcollateralization by an additional 10% (measured as a percent of the current pool balance). In addition to the strengths outlined above, we considered the following weaknesses: Approximately 85% of the obligors in the pool did not provide POI. This is comparable to the number of contracts across the 10 outstanding Drive Auto Receivables Trust () transactions of 80.3% as reported by SC management. As noted in the Significant Changes From and 2017-B section, SC decides to verify income using a risk-based approach. For this pool, those who had their incomes verified had a weighted average FICO of 550 and weighted average LTV of 109%, while those who did not had a weighted average FICO of 571 and weighted average LTV of 106%. Since the level of income verification has been relatively low for all of the deals, we believe the loss performance and repurchase activity on its securitizations are reflective of the company's verification strategy. Since July 2014, the sponsor has received civil subpoenas and civil investigative demands from various federal and state agencies--including from the Department of Justice, the SEC, and an executive committee representing attorneys general of 28 states--requesting documents that, among other things, relate to the origination, underwriting, and securitization of auto loans for varying time periods since In March 2017, SC entered into settlements (aggregate amount of $26 million) with the attorneys general of Massachusetts and Delaware to settle allegations that it facilitated the origination of certain Massachusetts and Delaware loans that it knew--or should have known--were in violation of applicable state consumer protection laws. These types of investigations and proceedings could result in adverse consequences to SC. We monitor these developments and discuss them with SC management. Specifically, the settlement covered loans purchased in those states from Since then, the company has expanded its dealer review process. Further, the settlement requires that SC ensure no third party that holds an interest in a loan originated by a dealer and purchased by SC will suffer a loss of principal as a result of the loan's default, if the loan was made by a dealer on the High Risk Dealer list and at the time the loan was made, or the borrower was not required to provide POI. The risk of default from income inflation is often detected during the loan's earliest stages (first two payments). SC has consistently repurchased loans that have failed to make their first two payments and had added a representation in this transaction that each contract has received or will have received its first two payments. If not, SC will repurchase them. JULY 20,

5 None of SC's securitizations have paid-off (first transaction was completed in March 2015), and thus we don't have a paid-off loss curve with which to project losses on the outstanding transactions. However, we used paid-off loss curves from Santander's SDART transactions and a derived loss curve from 2015-A to project losses on 's outstanding securitizations. The percentage of loans in 's pools with no FICO is high at 12.7% for , but down from 12.9% for Transaction Overview In 2015, SC established a new platform, Drive Auto Receivables Trust (), for deep subprime assets that do not conform to the collateral characteristics of its existing platforms, SDART and Chrysler Capital Auto Receivables Trust (CCART) is the 11th transaction issued from this platform. All the receivables included in the pool were originated by SC under its standard credit and underwriting procedures and will be serviced by SC will issue $ million in securities backed by retail installment sales contracts for new and used automobiles and light-duty trucks. The transaction is structured as a true sale of the receivables to Santander Drive Auto Receivables LLC (the depositor) from SC (the originator, sponsor, servicer, and seller), and then to (the issuer), which has pledged its interest in the receivables to the indenture trustee on the noteholders' behalf. In rating this transaction, S&P Global Ratings will review the legal matters that it believes are relevant to its analysis, as outlined in its criteria. (See chart 1 for the transaction structure.) JULY 20,

6 Transaction Structure incorporates the following structural features: A sequential-pay mechanism among the notes that results in increased credit enhancement for the rated notes as the pool amortizes. Initial overcollateralization of 19.70% of the initial pool balance that will build to a target that equals 30.20% of the current pool balance plus 2.50% of the initial pool balance by using any excess spread available after covering net losses to pay principal on the outstanding notes. The overcollateralization floor is set at 2.50% of the initial pool balance. A loss trigger that will step up the overcollateralization target to 40.20% of the current pool balance plus 2.50% of the initial pool balance if the collateral performance deteriorates and losses exceed the loss threshold. The triggers will be tested monthly and are not curable once breached. A nonamortizing reserve account that will be 1.00% of the initial pool balance and will be fully funded at closing. JULY 20,

7 Payment Structure The class A through E notes' issuance will equal $ million, and all classes will pay a fixed interest rate, except for class A-2-B, which will pay a floating rate. Interest and principal are scheduled to be paid to the rated notes on each monthly distribution date on the 15th day of each month or, if that is not a business day, the next business day, beginning Aug. 15, On each payment date, distributions will be made from available funds according to the payment priority in table 1. Table 1 Payment Waterfall Priority Payment 1 To the indenture and owner trustees, and the asset representations reviewer (ARR) any accrued and unpaid fees and any reasonable expenses not previously paid by the servicer, at a $300,000 cap per year, in aggregate. 2 To the servicer, the servicing fee (4.0%) and all unpaid servicing fees from previous periods. 3 To the class A noteholders, the accrued class A note interest due for the related interest period (paid pro rata). 4 The first principal allocation (the excess, if any, of the class A note balance over the pool balance). 5 To the class B noteholders, the accrued class B note interest due for the related interest period. 6 The second principal allocation (the excess, if any, of the combined class A and B note balances over the pool balance minus the first principal allocation). 7 To the class C noteholders, the accrued class C note interest due for the related interest period. 8 The third principal allocation (the excess, if any, of the combined class A, B, and C note balances over the pool balance minus the first and second principal allocations). 9 To the class D noteholders, the accrued class D note interest due for the related interest period. 10 The fourth principal allocation (the excess, if any, of the combined class A, B, C, and D note balances over the pool balance minus the first, second, and third principal allocations). 11 To the class E noteholders, the accrued class D note interest due for the related interest period. 12 The fifth principal allocation (the excess, if any, of the combined class A, B, C, D, and E note balances over the pool balance minus the first, second, third, and fourth principal allocations). 13 To the reserve account, any additional amounts required to make the cash on deposit in the reserve account equal to the specified reserve account balance. 14 The regular principal allocation, if any (in this step, the notes are paid down to build to the overcollateralization target). 15 To the certificate distribution account for the residual interest holder, any funds remaining. Events Of Default Under the indenture, the occurrence and continuation of any of the following events constitutes a default: A default in the interest payment on any of the controlling class' notes when due and payable that continues for five or more business days. A default in the principal payment on any note on the final scheduled payment or redemption date. The issuer fails to duly observe or perform its covenants or agreements. Any of the issuer's representations or warranties made under the indenture proves incorrect. The issuer files for bankruptcy. JULY 20,

8 Payment Priority After An Event Of Default On each payment date after an event of default occurs, available funds will be distributed in the priority shown in table 2. Table 2 Payment Priority After An Event Of Default Priority Payment 1 Any accrued and unpaid fees to the indenture and owner trustees and the ARR. 2 The servicing fee (4.0%) and all unpaid servicing fees to the servicer. 3 Interest, pro rata, to the class A noteholders. 4 If an acceleration of the notes occurs after, or as a result of, the event of default detailed in the first, second, or fifth bullet in the Events Of Default section above, pay in the following priority: principal to the class A-1 noteholders until the notes are paid in full; then principal to the class A-2 and A-3 noteholders, pro rata, based on each class' note balance until all class A notes are paid in full; then accrued class B note interest to the class B noteholders; then principal to the class B noteholders until the notes are paid in full; then accrued class C note interest to the class C noteholders; then principal to the class C noteholders until the notes are paid in full; then accrued class D note interest to the class D noteholders; then principal to the class D noteholders until the notes are paid in full; then accrued class E note interest; and then principal to the class E noteholders until the notes are paid in full. 5 If an acceleration of the notes has occurred after, or as a result of, the event of default detailed in bullets three or four in the Events Of Default section above, pay in the following priority: accrued class B note interest to the class B noteholders; then accrued class C note interest to the class C noteholders; then accrued class D note interest to the class D noteholders; then accrued class E note interest to the class E noteholders; then principal to the class A-1 noteholders until the notes are paid in full; then principal to the class A-2 and A-3 noteholders, pro rata, based on each class' note balance until all of the class A notes are paid in full; then principal to the class B noteholders until the notes are paid in full; then principal to the class C noteholders until the notes are paid in full; and then principal to the class D noteholders until the notes are paid in full; and then principal to the class E noteholders until the notes are paid in full. 6 Any remaining funds will be deposited into the certificate distribution account for distribution to or at the direction of the residual interestholder. Managed Portfolio Performance SC's managed portfolio performance continued to weaken through March 31, 2017, with increasing delinquencies and net losses. As of March 31, 2017, delinquencies of 31 days or more increased to 12.41% from 11.46% a year earlier. Furthermore, annualized losses for the three months ended March 31, 2017, were 9.99% compared with 9.62% for the same period in Management has attributed the increases to a greater mix of deep subprime originations in 2015 and reduced origination volume in 2016 and SC's managed portfolio declined 6.22% to $25.2 billion as of March 31, 2017, from $26.8 billion a year earlier. Of note, the table below shows the performance for SC's total subprime auto loan portfolio, including contracts securitized under both the SDART and platforms. Further, there is a higher concentration of lower-credit quality receivables in the pool than in the loss and delinquency tables presented below. Table 3 Managed Portfolio Principal amount outstanding at end of period (mil. $) As of March 31 As of Dec (ii) 25,154 26,821 25,247 26,498 22,862 21,128 16,206 14,139 14,801 JULY 20,

9 Table 3 Managed Portfolio (cont.) As of March 31 As of Dec. 31 Delinquencies (%) (ii) days days plus days and bankrupt accounts Total 31-plus-day delinquencies as a % of the principal amount outstanding(i) Net loss experience Average principal amount outstanding during the period (mil. $) Annualized net losses as a % of the average principal outstanding 25,148 26,620 26,045 25,459 22,499 18,918 15,124 14,325 10, (i)the servicer considers a receivable delinquent when an obligor fails to pay the required minimum portion of the scheduled payment by the due date, as determined per SC's customary servicing practices. With respect to Chrysler Capital receivables originated by the servicer before Jan. 1, 2017, the required minimum payment is 90% of the scheduled payment. With respect to all other receivables originated by the servicer or acquired by the servicer from an unaffiliated third-party originator before Jan. 1, 2017, the required minimum payment is 50% of the scheduled payment. With respect to receivables originated by the servicer or acquired by the servicer from an unaffiliated third-party originator on or after Jan. 1, 2017, the required minimum payment is 90% of the scheduled payment, regardless of which channel originated the receivable. In each case, the period of delinquency is based on the number of days payments are contractually past due. (ii)santander Consumer USA Inc.'s acquisition of the HSBC Automotive Trust (USA) and CitiFinancial Auto Ltd. receivables primarily drove the company's significant growth in SC--Santander Consumer USA Inc. Pool Analysis As of the June 30, 2017, cut-off date, the collateral pool comprised approximately $1, million in entirely SC-originated auto loans (see tables 4A and 4B for a collateral comparison with the prior securitizations). While the pool appears comparable to , we believe has a better mix of collateral than 2016-A, the highest-loss pool at this time. For example, the weighted average LTV has declined to 106.3% from 111.8%, and the percentage of loans with an LFS score of 450 or less has decreased to approximately 34% from 43%. The percentage of loans with an original term loan of months has increased to 15.55%, which is the highest concentration we have seen in a pool. However, these loans are characterized by a weighted average LTV of 94.4%, which is the lowest LTV across all of the Drive transactions for the month segment alone. Also, their weighted average LFS score of 475 is higher than all prior pools and on par with the weighted average LFS score from 2015-A of 474. Table 4A Collateral Comparison(i) B Issuance date July 31, 2017 June 28, 2017 March 29, A 2016-C 2016-B 2016-A Jan. 31, 2017 Nov. 22, 2016 May 25, 2016 Jan. 27, JULY 20,

10 Table 4A Collateral Comparison(i) (cont.) B 2017-A 2016-C 2016-B 2016-A Pool size (mil. $) 1,180.45(ii) 1,382.67(ii) 1, , , , SC (% of pool) Avg. original principal balance ($) 19,150 20,277 18,291 19,702 18,040 18,481 17,378 Weighted avg. APR (%) Weighted avg. original term (mos.) Seasoning (mos.) New vehicles (%) Used vehicles (%) Weighted avg. LTV ratio (%) Weighted avg. original FICO score(iii) No score or lower or higher Weighted avg. internal credit score(iv) or lower or higher Total % of loans with an original term of mos. Total % of loans with an original term for mos. Weighted avg. original FICO score for mos. Weighted avg. internal credit score for mos. Weighted avg. LTV ratio for mos. Top five state concentrations (%) TX=16.24 TX=15.70 TX=16.68 TX=15.90 TX=16.60 TX=17.23 CA=12.89 FL=10.16 FL=11.11 FL=11.18 FL=12.12 FL=12.69 FL=16.09 TX=11.95 GA=7.94 GA=7.50 CA=8.37 CA=8.90 CA=9.47 CA=10.86 FL=10.61 CA=7.69 CA=7.25 GA=6.58 GA=6.81 GA=6.41 GA=5.53 GA=6.25 NY=4.63 NY=4.26 NC=4.17 NC=4.20 NY=3.81 NY=3.53 NY= JULY 20,

11 Table 4A Collateral Comparison(i) (cont.) S&P Global Ratings' expected lifetime CNL (%) S&P Global Ratings' most recent revised expected lifetime CNL (%) B 2017-A 2016-C 2016-B 2016-A N/A N/A N/A N/A N/A N/A N/A Securitization performance Cumulative net loss as of July 2017 distribution date (%) N/A N/A Pool factor (%) N/A N/A Months outstanding N/A (i)all percentages are of the initial gross receivables balance. (ii)the pool excludes diesel engine equipped Jeep Grand Cherokee SUVs and Dodge Ram 1500 trucks that are the subject of the May 2017 Justice Department lawsuit against Fiat Chrysler for emission test violations. (iii)excludes receivables of obligors with no FICO scores. (iv)sc uses a proprietary internal credit scoring methodology to underwrite and originate collateral. The score ranges from one to 999, with a score of one indicating a high predicted likelihood of loss and a score of 999 indicating a low predicted likelihood of loss. --Drive Auto Receivables Trust. SDART--Santander Drive Auto Receivables Trust. SC--Santander Consumer USA Inc. APR--Annual percentage rate. CNL--Cumulative net loss. LTV--Loan-to-value. N/A--Not applicable. Table 4B Collateral Comparison(i) D 2015-C 2015-B 2015-A Issuance date July 31, 2017 Sept. 29, 2015 July 22, 2015 May 28, 2015 March 18, 2015 Pool size (mil. $) 1,180.45(ii) 1, , SC (% of pool) Avg. original principal balance ($) 19,150 18,344 18,318 18,879 18,583 Weighted avg. APR (%) Weighted avg. original term (mos.) Seasoning (mos.) New vehicles (%) Used vehicles (%) Weighted avg. LTV ratio (%) Weighted avg. original FICO score(iii) No score or lower or higher Weighted avg. internal credit score(iv) or lower or higher N/A N/A JULY 20,

12 Table 4B Collateral Comparison(i) (cont.) Total % of loans with an original term of mos. Total % of loans with an original term for mos. Weighted avg. original FICO score for mos. Weighted avg. internal credit score for mos D 2015-C 2015-B 2015-A Weighted avg. LTV ratio for mos Top five state concentrations (%) S&P Global Ratings' expected lifetime CNL (%) S&P Global Ratings' most recent revised expected lifetime CNL (%) TX=16.24 TX=14.63 TX=13.75 TX=20.75 TX=19.81 FL=10.16 FL=12.14 FL=12.15 FL=13.83 FL=11.84 GA=7.94 CA=11.16 CA=11.43 CA=9.02 CA=10.18 CA=7.69 GA=5.91 GA=6.13 GA=4.34 GA=5.57 NY=4.63 IL=4.25 IL=4.44 NC=3.89 IL= N/A Securitization performance Cumulative net loss as of July 2017 distribution date (%) N/A Pool factor (%) N/A Months outstanding (i)all percentages are of the initial gross receivables balance. (ii)the pool excludes diesel engine equipped Jeep Grand Cherokee SUVs and Dodge Ram 1500 trucks that are the subject of the May 2017 Justice Department lawsuit against Fiat Chrysler for emission test violations. (iii)excludes receivables of obligors with no FICO scores. (iv)sc uses a proprietary internal credit scoring methodology to underwrite and originate collateral. The score ranges from one to 999, with a score of one indicating a high predicted likelihood of loss and a score of 999 indicating a low predicted likelihood of loss. --Drive Auto Receivables Trust. SDART--Santander Drive Auto Receivables Trust. SC--Santander Consumer USA Inc. APR--Annual percentage rate. CNL--Cumulative net loss. LTV--Loan-to-value. N/A--Not applicable. Securitization Performance And Surveillance We currently maintain ratings on 10 transactions issued from 2015 through first-quarter On June 15, 2017, we reviewed our loss expectations for the 2015 series vintages and revised/maintained them as shown in table 5 below (see "Seven Ratings Raised, Four Affirmed On Four Drive Auto Receivables Trust Transactions," published June 15, 2017). Table 5 CNL Expectations (As Of June 15, 2017) Series Original lifetime CNL exp. (%) Updated lifetime CNL exp. (%) 2015-A B C JULY 20,

13 Table 5 CNL Expectations (As Of June 15, 2017) (cont.) Series Original lifetime CNL exp. (%) Updated lifetime CNL exp. (%) 2015-D A N/A 2016-B N/A 2016-C N/A CNL exp.--cumulative net loss expectations. N/A--Not applicable. Due to the deleveraging inherent to these structures, we raised our ratings on seven classes across four transactions (see table 6). Table 6 June 15, 2017, Rating Actions Rating Series Class To From 2015-A C AAA (sf) A (sf) 2015-B C AAA (sf) A (sf) 2015-B D A- (sf) BBB (sf) 2015-C C AAA (sf) A (sf) 2015-C D A- (sf) BBB+ (sf) 2015-D C AA- (sf) A (sf) 2015-D D BBB+ (sf) BBB (sf) For all outstanding classes, the credit support levels have increased as a percentage of the declining collateral balances. In addition, the overcollateralization for each series can step up to a higher target overcollateralization level if certain CNL metrics are breached. In our view, all of the classes have adequate credit enhancement at their current rating levels. The 2016 transactions are experiencing weaker recoveries compared to the 2015 transactions. We have observed this trend across most auto securitizations, and we will continue to monitor it. We will continue to monitor the outstanding transactions' performances and will take rating actions as we deem appropriate. JULY 20,

14 Chart 2 JULY 20,

15 Chart 3 JULY 20,

16 Chart 4 S&P Global Ratings' Expected Loss: 27.00%-28.00% We examined static pool data from SC, broken out by the company's loss forecasting score (LFS) and by term, which was further segmented by LFS. The LFS is based on the obligor's credit quality, the loan structure, and other noncredit-bureau attributes. We used the vintage 2005, 2006, 2007, 2008, and 2009 vintage aggregate paid-off loss curves to project losses for the outstanding SC-originated collateral by internal score band, only projecting vintages with at least 12 months of performance. We then applied the pool composition weights to the projected losses of each LFS band to determine a weighted average loss level for the pool. We also used projected loss levels for the various loan terms further segmented by LFS band to arrive at another weighted average loss proxy for the pool. Based on our review of the origination static pool performance by internal score band and internal score band segmented by term, securitization performance, and our forward-looking view of the economy, we expect to experience CNLs in the 27.00%-28.00% range. JULY 20,

17 Cash Flow Modeling: Break-Even Cash Flows Cash flow modeling tests the availability and timing of excess spread and stresses the release of enhancement. Excess spread, which can be a critical component of a transaction's overall credit enhancement, can be affected by many factors, such as the absolute level and timing of defaults, prepayment speeds, payment timing lags, and the collateral terms. We modeled the transaction to simulate stress scenarios appropriate for the assigned preliminary ratings (see table 7). Table 7 Cash Flow Assumptions And Results Class Front-loaded loss curve A B C D E Scenario (preliminary rating) AAA (sf) AA (sf) A (sf) BBB (sf) BB (sf) Loss timing input by months outstanding (12/24/36/48) (%) Loss timing output by months outstanding (12/24/36/48) (%) 40/40/10/10 40/40/10/10 40/40/10/10 40/40/10/10 40/40/10/10 100/0/0/0 54/46/0/0 41/40/10/9 41/40/10/10 41/40/10/10 Voluntary ABS (%) Recoveries (%) Recovery lag (mos.) Servicing fee (%) Approximate break-even net loss levels (100% credit to excess spread) (%)(i) Approximate break-even gross loss levels (100% credit to excess spread) (%)(i) Back-loaded loss curve Scenario (preliminary rating) AAA (sf) AA (sf) A (sf) BBB (sf) BB (sf) Loss timing input by months outstanding (12/24/36/48/60) (%) Loss timing output by months outstanding (12/24/36/48/60) (%) 20/30/25/15/10 20/30/25/15/10 20/30/25/15/10 20/30/25/15/10 20/30/25/15/10 100/0/0/0/0 49/51/0/0/0 29/41/30/0/0 24/34/28/15/0 22/32/26/15/6 Voluntary ABS (%) Recoveries (%) Recovery lag (mos.) Servicing fee (%) Approximate break-even net loss levels (100% credit to excess spread) (%)(i) Approximate break-even gross loss levels (100% credit to excess spread) (%)(i) (i)the maximum cumulative net and gross losses on the pool that the transaction can withstand without a payment default on the relevant classes of notes. ABS--Absolute prepayment speed. JULY 20,

18 Using an expected net loss of 27.00%-28.00% of the initial pool and applying the transaction-appropriate stresses in our internal cash flow runs, the break-even results show that the class A through E notes are enhanced to the degree necessary to withstand stressed net loss levels that are consistent with the assigned preliminary ratings. Loss Trigger Analysis Our cash flows included the CNL trigger that increases the target overcollateralization amount to 40.20% plus 2.50% of the current and initial pool balances, respectively, from 30.20% plus 2.50%, if the CNL threshold is breached. The CNL triggers are tested monthly and are not curable once breached (see table 8 below). In our break-even front- and back-loaded scenarios, the trigger was breached in all scenarios, except for the class E back-loaded scenario. However, excess spread was used to cover losses, and overcollateralization did not build above the initial target overcollateralization amount. Table 8 CNL Threshold Changes Month CNL threshold (%) and thereafter CNL--Cumulative net loss. Sensitivity Analysis In addition to analyzing break-even cash flows, we conducted a sensitivity analysis to determine the potential rating impact of a moderate ('BBB') stress scenario, all else being equal, on our ratings on the notes (see table 9). Table 9 Sensitivity Analysis Summary: Moderate 'BBB' Stress (1.35x Base Case) Used Floating-Rate Structure Cumulative net loss level (28.00% x 1.35) (%) Loss timing by months outstanding (12/24/36/48) (%) Fast loss curve Slow loss curve 40/40/10/10 20/30/25/15/10 Voluntary ABS (%) Recoveries (%) Recovery lag (mos.) 4 4 Servicing fee (%) Potential rating decline Class A ('AAA (sf)') No rating decline expected No rating decline expected JULY 20,

19 Table 9 Sensitivity Analysis Summary: Moderate 'BBB' Stress (1.35x Base Case) Used Floating-Rate Structure (cont.) Fast loss curve Slow loss curve Class B ('AA (sf)') No rating decline expected No rating decline expected Class C ('A (sf)') One rating category One rating category Class D ('BBB (sf)') Two rating categories Two rating categories Class E ('BB (sf)') ABS--Absolute prepayment speed. Class E defaults on principal in this scenario after paying off approximately 46% of the bond Class E defaults on principal in this scenario after paying off approximately 90% of the bond Our sensitivity analysis indicates that in a moderate stress scenario, our ratings on the class A and B notes ('AAA (sf)' and 'AA (sf)', respectively) will remain at the assigned preliminary ratings, our rating on the class C notes ('A (sf)') will remain within one category of the assigned preliminary rating, and our rating on the class D notes ('BBB (sf)') will remain within two rating categories of the assigned preliminary rating while they are outstanding. The class E 'BB (sf)' rated notes will remain within two rating categories of the assigned preliminary rating during the first year, but will eventually default under the 'BBB' stress scenario, after having received 46%-90% of their principal. These rating movements are within the limits specified by our credit stability criteria (see "Methodology: Credit Stability Criteria," published May 3, 2010). Chart 5 JULY 20,

20 Chart 6 Money Market Tranche Sizing The proposed money market tranche's (class A-1) legal final maturity date is August 15, To test whether the money market tranche can be repaid by its maturity date, we ran cash flows using assumptions to delay the principal collections. In our cash flow run, we assumed zero defaults and a zero absolute prepayment speed. We also confirmed that approximately 12 months of principal collections would be sufficient to pay off the money market tranche. Legal Final Maturity To test the legal final maturity dates set for the long-dated tranches (classes A-2 through D), we determined when the respective notes would fully amortize in a zero-loss and zero-prepayment scenario and then added three months to the result. For the longest-dated security (class E), we added 12 months to the tenor of the longest receivable in the pool to accommodate extensions on the receivables. Furthermore, in the break-even scenario for each rating level, we confirmed that credit enhancement was sufficient to both cover losses and repay the related notes in full by the legal final maturity date. JULY 20,

21 Santander Consumer USA Inc. SC was established as an independent entity under the name Drive Financial Services on Aug. 18, Before being acquired by Banco Santander S.A. (A-/Stable/A-2) on Dec. 7, 2006, Drive Financial Services was 64.5% owned by BoS (USA) Drive Inc., a wholly owned subsidiary of HBOS Group PLC, and 35.5% owned by Drive Financial Services' management. Banco Santander S.A. completed its acquisition of Drive Financial Services on Dec. 7, 2006, for $771 million in cash, resulting in a 91.5% ownership of the company. SC has been a part of Santander Holdings USA Inc. (SHUSA) since 2009, when Banco Santander S.A. (the parent of SHUSA) contributed the business to SHUSA. In the past few years, various changes have occurred in SHUSA's ownership interest in and accounting for SC. Specifically, in December 2011, SC issued stock privately to investors, lowering SHUSA's ownership to 65% from 90%. At that time, SC was deconsolidated from SHUSA's balance sheet. Then, in January 2014, investors and SHUSA sold a portion of SC stock in an IPO. Following the IPO, SHUSA sold down its ownership to 59% of SC. Even though SHUSA's ownership of the subsidiary was reduced, SC was again fully consolidated on SHUSA's balance sheet after the investor group's stake sale. In our corporate analysis, and in line with the accounting treatment, we have continually viewed SC as if it were wholly owned by SHUSA because we believe that SHUSA bears the risk of this subsidiary and is ultimately responsible for its support. SHUSA has been seeking regulatory approval to increase its ownership in SC to 69% by acquiring the approximate 10% stake owned by SC's former CEO who resigned in July SC, based in Dallas, originates and services auto loans and leases through a network of more than 17,000 dealers nationwide. Since February 2013, it has also served as Chrysler Group LLC's preferred lender by originating auto loans across the full credit spectrum. In 2016, SC originated approximately $21.9 billion in auto-related receivables, comprising 38% core subprime auto loans, 37% Chrysler Capital retail auto loans, and 25% Chrysler Capital auto leases. As of Dec. 31, 2016, it had $38 billion in assets, $34 billion in finance receivables and leases, and $5.2 billion in shareholder equity. Including servicing for third parties, its average managed consumer portfolio totaled $52.7 billion in The company reported that it earned a net income of $766 million in 2016, down 7% from $824 million the prior year. Banco Santander S.A., headquartered in Madrid, is a worldwide banking organization that was established in 1857 and is a European leader in consumer finance with activities in 13 European countries, particularly Spain, Germany, Italy, and Poland. Banco Santander S.A. owns 100% of Santander Holdings U.S.A. Inc. (BBB+/Stable/A-2), which now has approximately 59.0% equity interest in SC. Banco Santander S.A. is the largest financial institution by assets in Spain, and the credit rating is related to the sovereign credit ratings on Spain (BBB+/Stable/A-2). Related Criteria And Research Related Criteria General Criteria: Methodology For Linking Long-Term And Short-Term Ratings, April 7, 2017 Criteria - Structured Finance - General: Ratings Above The Sovereign - Structured Finance: Methodology And Assumptions, Aug. 8, JULY 20,

22 Criteria - Structured Finance - General: Methodology: Criteria For Global Structured Finance Transactions Subject To A Change In Payment Priorities Or Sale Of Collateral Upon A Nonmonetary EOD, March 2, 2015 Criteria - Structured Finance - General: Criteria Methodology Applied To Fees, Expenses, And Indemnifications, July 12, 2012 General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012 Criteria - Structured Finance - RMBS: U.S. Interest Rate Assumptions Revised For May 2012 And Thereafter, April 30, 2012 Criteria - Structured Finance - ABS: General Methodology And Assumptions For Rating U.S. Auto Loan Securitizations, Jan. 11, 2011 Criteria - Structured Finance - General: Standard & Poor's Revises Criteria Methodology For Servicer Risk Assessment, May 28, 2009 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Special-Purpose Entities, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Appendix III: Revised UCC Article 9 Criteria, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Criteria Related To Asset-Backed Securities, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Securitizations By Code Transferors, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Select Issues Criteria, Oct. 1, 2006 Related Research Seven Ratings Raised, Four Affirmed On Four Drive Auto Receivables Trust Transactions, June 15, 2017 Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of the Top Five Macroeconomic Factors, Dec. 16, 2016 Four Ratings Raised and 20 Ratings Affirmed From six Drive Auto Receivables Trust Deals, Oct. 19, 2016 Banco Santander And Banco Bilbao Vizcaya Argentaria Upgraded On Spain Action; Outlook Stable; Some Banks Affirmed, Oct. 6, 2015 In addition to the criteria specific to this type of security (listed above), the following criteria articles, which are generally applicable to all ratings, may have affected this rating action: "Post-Default Ratings Methodology: When Does Standard & Poor's Raise A Rating From 'D' Or 'SD'?," March 23, 2015; "Global Framework For Assessing Operational Risk In Structured Finance Transactions," Oct. 9, 2014; "Methodology: Timeliness of Payments: Grace Periods, Guarantees, And Use of 'D' And 'SD' Ratings," Oct. 24, 2013; "Counterparty Risk Framework Methodology And Assumptions," June 25, 2013; "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," Oct. 1, 2012; "Methodology: Credit Stability Criteria," May 3, 2010; and "Use of CreditWatch And Outlooks," Sept. 14, The primary analyst would like to thank Joe Fang for their analytical contributions to this presale report. Analytical Team Primary Credit Analyst: Amy S Martin, New York (1) ; amy.martin@spglobal.com Secondary Contact: Jenna Cilento, New York (1) ; jenna.cilento@spglobal.com JULY 20,

23 Copyright 2017 by Standard & Poor s Financial Services LLC. All rights reserved. No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an as is basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages. Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P s opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof. S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, (free of charge), and and (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at STANDARD & POOR S, S&P and RATINGSDIRECT are registered trademarks of Standard & Poor s Financial Services LLC. JULY 20,