Report: Santander Nears Deal to Be Chrysler's In-House Financing Company


The prospectus connected with a $1.25 billion offering of automobile receivables-backed securities Santander Consumer USA rolled out earlier this month showed contracts involving Dodge vehicles constituted the highest percentages of receivables and outstanding principal balances within the deal.

Future regulatory filings might outline an even higher percentage if Santander reaches a deal to be the in-house financing company for Chrysler Group, a development that reportedly could come within the next two weeks.

The Wall Street Journal reported late last Thursday that sources familiar with negotiations said Chrysler is "getting close to striking a deal" with Santander on a relationship for consumer loans and leases as well as dealer floor planning through a new entity called Chrysler Capital.

The online report indicated people close to the discussions said that Chrysler and Santander have signed a term sheet, and that the deal could be finalized within the next couple of weeks.

Since filing for bankruptcy back in 2009, Chrysler dealers having been using Ally Financial for financing. However, that contract expires on April 30.

Last spring, Chrysler produced necessary announcements to satisfy the agreement's requirement that notice of nonrenewal be provided at least 12 months prior to the date of expiration.

"Under the agreement since April 30, 2009, Ally has provided wholesale financing to our dealer network and retail financing to our customers in the U.S. and Canada," Chrysler said in its Form 8-K to the Securities and Exchange Commission.

"We are required during the term of the agreement to ensure that Ally finances a specified minimum percentage of the vehicles sold under certain of our subvention programs, and to repurchase Ally-financed inventory from dealers upon certain triggering events," the company continued.

"We are currently pursuing various ways to optimize the financial products and services available to meet the needs of our dealers and customers in the U.S. and Canada," Chrysler officials went on to say. "We have already begun discussing these alternatives with a number of financial institutions, including Ally."

Meanwhile, the developments between Chrysler and Santander arrived just a couple of months after DriveTime Automotive Group sent notice to the SEC stating it terminated its definitive selling agreements with Santander.

DriveTime indicated they made the decision about the selling agreement first reached on Sept. 11 "due to certain unsatisfied conditions to the closings of the transactions contemplated."

The company continued in its Form 8-K that "prior to the terminations, DriveTime engaged in good faith discussions with the purchasers regarding potential alternative transactions or transaction structures.

"An agreement has not been reached, however, and while the parties may continue to engage in discussions regarding potential alternatives, the transactions set forth in the definitive agreements will not be consummated," DriveTime went on to say.

When the original purchase agreement was announced back in September, officials explained that DT Acceptance Corp. and its subsidiary, DT Credit Co., would sell its finance receivable portfolio, which consists of vehicle-related installment sales contracts, certificates representing its residual interests in securitizations of finance receivables, and certain other assets to Santander.

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