DBRS Takes Rating Actions on VCL 17

DBRS Ratings Limited (DBRS) has reviewed the VCL 17 transaction and taken the following rating actions:

-- Class A Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (sf)

VCL 17 is a securitisation supported by a portfolio of German lease receivables to retail and commercial customers secured by new, used and demonstration vehicles. The receivables were originated and are serviced by Volkswagen Leasing, GmbH.

The rating actions are based upon the following analytical considerations:

-- Portfolio performance of the receivables in terms of arrears and cumulative net losses as of the January 2015 payment date.
-- Updated default, recovery and loss assumptions on the remaining receivables balance.
-- Current available credit enhancement for each Class of Notes to cover the expected losses at the respective rating level.

As of the 21 January 2015 payment date, the 90+ delinquency ratio was 0.48%. The cumulative net loss ratio was at 0.16% of the original collateral balance.

The transaction has a sequential/pro-rata amortisation structure whereby all principal payments from the receivables pay down the Class A Notes until Class A overcollateralisation reaches its target level of 12.25%. As of the April 2014 payment date, the Class A overcollateralisation level reached 12.25%.

Credit enhancement to the Class B Notes stems from the overcollateralisation and a Cash Reserve Fund. Additionally, Class A Notes are supported by the Class B Notes. Overcollateralisation is equal to 7.50% and 12.25% for the Class B and A Notes, respectively.

The amortising Cash Reserve Fund is equal to EUR 7.5 million. It has been funded at closing with an amount equal to 1.20% of the original portfolio balance and was allowed to amortise down to 1.0% of the original portfolio balance.

Bank of New York Mellon – Frankfurt Branch holds the Treasury Account for the transaction. The DBRS private rating of Bank of New York Mellon – Frankfurt Branch complies with the threshold for the Account Bank, given the rating assigned to the Class A Notes, as described in the DBRS Legal Criteria for European Structured Finance Transactions. Bank of Nova Scotia is the swap counterparty. The DBRS public rating of Bank of Nova Scotia is above the First Rating Threshold as described in the DBRS Derivative Criteria for European Structured Finance Transactions.

Notes:
All figures are in Euros unless otherwise noted.

The principal methodology applicable is the Master European Structured Finance Surveillance Methodology.

Other methodologies and criteria referenced in this transaction are listed at the end of this press release and can be found on www.dbrs.com at:
http://www.dbrs.com/about/methodologies

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include monthly investor reports provided by Volkswagen Leasing GmbH.

DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

The last rating action on this transaction took place on 28 April 2014.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of the changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):
-- DBRS expected a Base Case Probability of Default (PD) and Loss Given Default (LGD) for each pool of receivables based on a review of the transaction performance. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- The Base Case PD and LGD of the current pool of receivables are 2.53% and 40%, respectively.
-- The Risk Sensitivity overview below illustrates the expected rating of each Class of Notes if the PD and LGD increase by a certain percentage over the Base Case assumption. For example, if the LGD increases by 50%, the ratings for the Class A Notes would be expected to remain at AAA (sf), all else being equal. If the PD increases by 50%, the ratings for the Class A Notes would be expected to remain at AAA (sf), all else being equal. If both the PD and LGD increase by 50%, the ratings for the Class A Notes would be expected to remain at AAA (sf).

Class A Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf).
-- 50% increase in LGD, expected rating of AAA (sf).
-- 25% increase in PD, expected rating of AAA (sf).
-- 50% increase in PD, expected rating of AAA (sf).
-- 25% increase in LGD and 25% increase in PD, expected rating of AAA (sf).
-- 25% increase in LGD and 50% increase in PD, expected rating of AAA (sf).
-- 50% increase in LGD and 25% increase in PD, expected rating of AAA (sf).
-- 50% increase in LGD and 50% increase in PD, expected rating of AAA (sf).

Class B Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf).
-- 50% increase in LGD, expected rating of AA (sf).
-- 25% increase in PD, expected rating of AA (sf).
-- 50% increase in PD, expected rating of AA (sf).
-- 25% increase in LGD and 25% increase in PD, expected rating of AA (sf).
-- 25% increase in LGD and 50% increase in PD, expected rating of AA (sf).
-- 50% increase in LGD and 25% increase in PD, expected rating of AA (sf).
-- 50% increase in LGD and 50% increase in PD, expected rating of AA (sf).

For further information on DBRS historic default rates published by the European Securities and Markets Administration (ESMA) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: Alex Garrod
Initial Rating Date: 25 March 2013
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Vito Natale
Rating Committee Chair: Diana Turner

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960

The rating methodologies and criteria used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies

-- Legal Criteria for European Structured Finance Transactions.
-- Derivative Criteria for European Structured Finance Transactions.
-- Master European Structured Finance Surveillance Methodology.
-- Operational Risk Assessment for European Structured Finance Servicers.
-- Unified Interest Rate Model for European Securitisations.