Santander Consumer Shares Rise in Debut

January 23 2014

By: Rachel Abrams


Santander Consumer USA’s new deal with Chrysler may have helped the company’s debut on the New York Stock Exchange on Thursday, as shares rose 5 percent, closing at $25.20.

Santander Consumer, the American auto-lending arm of the Spanish banking giant Grupo Santander, is a leading originator of car loans in the United States and an active lender in the subprime market.

The I.P.O. was priced at $24 a share on Wednesday night. The company’s investors, which include the private equity firms Kohlberg Kravis Roberts, Centerbridge Partners and Warburg Pincus, raised about $1.8 billion after selling 75 million shares in the offering.

On Wednesday, Santander Consumer had raised its expectations for the offering from earlier estimates of 65 million shares at a price of $22 to $24 each. The revised price range was $24 to $25 a share.

Shares of Santander rose about 8 percent by midday before coming down at the close of trading.

Santander Consumer’s growth strategy, and particularly a new arrangement with Chrysler, may have helped drive the stock up on Thursday. In February, Santander paid Chrysler $150 million to become the carmaker’s preferred provider for the next decade.

“We anticipated that the Santander Consumer USA offering would be well-received insofar as the company has a very real growth driver in its relationship with Chrysler,” said Mark Palmer, an analyst with BTIG.

The company has also raised the percentage of its business that comes from more creditworthy borrowers. From May 1 through Sept. 30, the company reported that 30 percent of its retail installment contract originations were to prime borrowers, compared with 14 percent in 2012, according to a regulatory filing on Wednesday.

“Through Chrysler Capital and other relationships, we have been increasing, and expect to continue to increase, the proportion of loans and leases that we originate to finance consumer purchases of new automobiles and, by extension, to prime consumers,” the company said in the filing.

Santander Consumer also plans to offer competitive financing to subprime borrowers at Chrysler dealerships.

“We felt like the new car market was underserved in terms of access to credit for subprime borrowers, and we have worked with Chrysler to bring the cost of financing for subprime borrowers down,” said Thomas G. Dundon, Santander Consumer’s chief executive.