DBRS Confirms AAA (sf) Ratings of All Existing DFM Master S.A. Class A Notes

DBRS Ratings Limited (DBRS) has today confirmed its AAA (sf) ratings originally assigned to the series 2011-1, 2011-2, 2011-5 and 2013-1 of asset-backed floating-rate Notes issued by DFM Master S.A. acting for and on behalf of its Compartment 1. The confirmation follows the review of the Amendment Agreement executed on 19 May 2015 that envisages the extension of the revolving period until the July 2015 Payment Date.

DBRS previously confirmed the AAA (sf) ratings of the series 2011-1, 2011-2 and 2011-5 Notes on 25 August 2011, 24 January 2012, 23 April 2012 and 23 May 2012.

On 28 May 2013 and 27 May 2014 DBRS confirmed the AAA (sf) ratings to all the previously mentioned Notes plus the newly issued series 2013-1 Notes.

The securitised receivables are related to granted loans made by Dealers Financierings Maatschaapij, N.V. (DFM N.V.) to corporate lessors for purposes of financing their auto leasing business. The loans are secured by the underlying vehicles and the related lease contracts. DFM N.V. is a subsidiary of Volkswagen Pon Financial Services, B.V. (VWPFS) which is 60% owned by Volkswagen Financial Services Group.

Deutsche Bank AG, London Branch is the Account Bank for the transaction and complies with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology given the ratings of the Notes.

The ratings are based upon review by DBRS of the following analytical considerations:

-- Transaction capital structure and form and sufficiency of available credit enhancement.
-- Relevant credit enhancement in the form of a cash collateral account and overcollateralisation. Credit enhancement levels are sufficient to support DBRS’s projected expected cumulative net loss (CNL) assumption (including residual losses) under various stress scenarios at a AAA (sf) standard.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested.
-- The transaction parties’ capabilities with respect to originations, underwriting, servicing and financial strength.
-- The credit quality of the collateral and ability of the Servicer to perform collection activities on the collateral.
-- The Amendment Agreement dated 19 May 2015.

Note:
All figures are in euros unless otherwise noted.

The principal methodology applicable is “Rating European Consumer and Commercial Asset-Backed Securitisations”.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

Due to the inclusion of a revolving period in the transaction, the collateral was initially modelled based on the worst-case replenishment criteria set forth in the transaction legal documents. These assumptions have not changed and consequently Cash Flow modelling analysis was not conducted.

Other methodologies and criteria referenced in this transaction are listed at the end of this press release. This 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’s “The Effect of Sovereign Risk on Securitisations in the Euro Area” commentary on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include performance data relating to the receivables provided by Dealers Financierings Maatschaapij N.V. 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 initial report providing additional analytical detail is available by clicking on the link or by contacting us at info@dbrs.com.

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

To assess the impact of 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 the portfolio based on a review of historical data. Additionally, given the revolving nature of the portfolio, DBRS assumed the most conservative distribution given the portfolio concentration limits under the transaction documentations. Adverse changes to asset performance may cause stresses to Base Case assumptions and therefore have a negative effect on credit ratings.

-- Probability of Default Rate Used: Base Case PD of 2.90%, a 25% and 50% increase on the Base Case PD.
-- Recovery Rate Used: Base Case Recovery rate of 50%.
-- Loss Given Default Rate Used: Base Case LGD of 50%, a 25% and 50% increase on the Base Case LGD.
-- Residual Value Haircut: 40%, a 50% increase on the Base Case.

-- The Risk Sensitivity below illustrates the ratings expected for each Series of Class A Notes if the Residual Value Haircut is increased by 50% and the PD and LGD increase by a certain percentage over the Base Case assumptions. For example, if the LGD increases by 50%, the rating for each Series of Class A Notes would remain at AAA (sf), all else being equal. If the PD increases by 50%, the rating for each Series of Class A Notes would also remain at AAA (sf), all else being equal. Furthermore, if both the PD and LGD increase by 50%, the rating for each Series of Class A Notes would be expected to remain at AAA (sf), all else being equal.

Class A Notes Risk Sensitivity following a 50% increase in the Residual Value Haircut:
-- 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).
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf).
-- 50% increase in PD, expected rating of AAA (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (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: Mike Babick
Initial Rating Date: 24 May 2011
Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Eric Levassor
Most Recent Rating Date: 27 May 2014
Rating Committee Chair: Chuck Weilamann

DBRS's rating definitions and the terms of use of such ratings are available at www.dbrs.com

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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;
-- Operational Risk Assessment for European Structured Finance Servicers;
-- Unified Interest Rate Model Methodology for European Securitisations;
-- Master European Structured Finance Surveillance Methodology.