Santander Retail Auto Lease Trust 2021-A -- Moody's assigns provisional ratings to Santander Retail Auto Lease Trust 2021-A notes

Rating Action: Moody's assigns provisional ratings to Santander Retail Auto Lease Trust 2021-A notesGlobal Credit Research - 10 Mar 2021Approximately $1.18 billion securities ratedNew York, March 10, 2021 -- Moody's Investors Service, ("Moody's") has assigned provisional ratings to the notes to be issued by Santander Retail Auto Lease Trust 2021-A (SRT 2021-A). This is the first auto lease transaction sponsored by Santander Consumer USA Inc. (SC; not rated) in 2021. The notes will be backed by a pool of closed-end retail automobile leases originated by SC, the servicer and administrator for the transaction, through its Chrysler Capital division.The complete rating actions are as follows:Issuer: Santander Retail Auto Lease Trust 2021-AClass A-1 Notes, Assigned (P)P-1 (sf)Class A-2 Notes, Assigned (P)Aaa (sf)Class A-3 Notes, Assigned (P)Aaa (sf)Class A-4 Notes, Assigned (P)Aaa (sf)Class B Notes, Assigned (P)Aa2 (sf)Class C Notes, Assigned (P)A2 (sf)RATINGS RATIONALEThe ratings are based on the quality of the underlying collateral and its expected performance, the strength of the capital structure, and the experience and expertise of SC as the servicer and administrator.Moody's expected median cumulative net credit loss expectation for SRT 2021-A is 1.0% and the total loss at a Aaa stress on the collateral is 26.0% (including 5.0% credit loss and 21.0% residual value loss at a Aaa stress). The expected loss and the total loss at a Aaa stress are the same as SRT 2020-B, the last transaction we rated. Moody's based its cumulative net credit loss expectation and total loss at a Aaa stress on an analysis of the quality of the underlying collateral; the historical credit loss and residual value performance of similar collateral, including securitization performance and managed portfolio performance; the ability of SC to perform the servicing functions; and current expectations for the macroeconomic environment during the life of the transaction.At closing, the Class A notes, the Class B notes, and the Class C notes are expected to benefit from 20.75%, 16.50%, and 13.00% of hard credit enhancement, respectively. Hard credit enhancement for the notes consists of a combination of overcollateralization, a non-declining reserve account and subordination. The notes may also benefit from excess spread.The COVID-19 pandemic has had a significant impact on economic activity. Although global economies have shown a remarkable degree of resilience to date and are returning to growth, the uneven effects on individual businesses, sectors and regions will continue throughout 2021 and will endure as a challenge to the world's economies well beyond the end of the year. While persistent virus fears remain the main risk for a recovery in demand, the economy will recover faster if vaccines and further fiscal and monetary policy responses bring forward a normalization of activity. As a result, there is a heightened degree of uncertainty around our forecasts. Our analysis has considered the effect on the performance of consumer assets from a gradual and unbalanced recovery in the US economic activity. Specifically, for US Auto lease deals, performance will continue to benefit from government support and the improving unemployment rate, which will support lessees' income and their ability to make lease payments. However, any softening of used vehicle prices will impact residual value performance on leases. Furthermore, any elevated level of lessee assistance programs, such as lease deferrals and extensions, may adversely impact scheduled cash flows to bondholders. We regard the COVID-19 outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.The principal methodology used in these ratings was "Moody's Global Approach to Rating Auto Loan- and Lease-Backed ABS" published in December 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1202515. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Factors that would lead to an upgrade or downgrade of the ratings:UpMoody's could upgrade the subordinate notes if, given current expectations of portfolio losses, levels of credit enhancement are consistent with higher ratings. In sequential pay structures, such as the one in this transaction, credit enhancement grows as a percentage of the collateral balance as collections pay down senior notes. Prepayments and interest collections directed toward note principal payments will accelerate this build of enhancement. Moody's expectation of pool losses could decline as a result of a lower number of obligor defaults or appreciation in the value of the vehicles securing an obligor's promise of payment. Portfolio losses also depend greatly on the US job market, the market for used vehicles, and changes in servicing practices.DownMoody's could downgrade the notes if levels of credit enhancement are insufficient to protect investors against current expectations of portfolio losses. Losses could rise above Moody's original expectations as a result of a higher number of obligor defaults or deterioration in the value of the vehicles securing an obligor's promise of payment. Portfolio losses also depend greatly on the US job market and the market for used vehicles. Other reasons for worse-than-expected performance include poor servicing, error on the part of transaction parties, inadequate transaction governance and fraud. In our analysis of the Class A-1 money market tranche, we applied incremental stresses to our typical cash flow assumptions in consideration of a likely slowdown in borrower payments brought on by the economic impact of the COVID-19 pandemic. Additionally, Moody's could downgrade the Class A-1 short-term rating following a significant slowdown in principal collections that could result from, among other things, high delinquencies or a servicer disruption that impacts obligor's payments.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1270471.The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. 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Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.At least one ESG consideration was material to the credit rating action(s) announced and described above.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Toms Zachariah Vice President - Senior Analyst Structured Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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