DBRS Confirms Ratings of Driver Eleven GmbH Class A Notes, Upgrades Class B Notes

DBRS Ratings Limited (DBRS) has today reviewed the notes issued by Driver Eleven GmbH (the Issuer) and has taken the following rating actions:

-- Class A confirmed at AAA (sf)
-- Class B upgraded to AA (sf) from A (High) (sf)

The confirmation of the ratings for the Class A Notes and the upgrade of the Class B Notes are based upon the following analytical considerations, as described more fully below:

-- Portfolio performance, in terms of level of delinquencies and defaults, as of 21 July 2015 payment date.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested.
-- Currently available credit enhancement to the Class A and Class B Notes to cover expected losses assumed in line with, respectively, a AAA (sf) and a AA (sf) rating level.
-- The deleveraging of the Class B Notes.

Driver Eleven GmbH is a securitisation of a pool of auto loans receivables related to new and used motor vehicles originated in Germany by Volkswagen, Audi, SEAT and Skoda dealers. The transaction closed in July 2013 and the portfolio is static.

As of the 21 July 2015 payment date, the 90+ delinquency ratio was 0.27%. The cumulative gross default ratio was at 0.65% 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 11.00%. As of July 2015, the Class A overcollateralisation level is at 11.00%. Thereafter, the Class A and Class B Notes receive principal on a pro rata basis and will continue to do so unless a performance trigger is breached.

Credit enhancement to the Class B Notes stems from the overcollateralisation and a Cash Reserve Fund. Additionally, the Class A Notes are supported by the Class B Notes. Credit enhancement is equal to 7.00% and 11.00%, for the Class B and A Notes respectively.

The amortising Cash Reserve Fund is equal to EUR 7.5 million (the floor amount) and has been equal to its target level at each payment date. 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.

Elavon Financial Services Limited holds the Treasury Account for the transaction. The DBRS private rating of Elavon Financial Services Limited complies with the threshold for the Account Bank given the rating assigned to the Class A Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

The underlying assets are fixed-rate auto loan receivables whereas the notes are floating-rate. The resulting interest rate mismatch is mitigated by an interest rate swap for each class of notes. The counterparty to both hedging agreements is Bank of Nova Scotia, rated AA/ R-1 (high) with a Negative Trend. This is consistent with DBRS swap counterparty criteria.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is the “Master European Structured Finance Surveillance Methodology”. DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology. A review of the transaction legal documents was not conducted as the documents have remained unchanged since the most recent rating action.

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

The sources of information used for this rating include servicer reports provided by Volkswagen Bank GmbH (the Servicer).

DBRS does not rely upon third-party due diligence in order to conduct its analysis. DBRS was not supplied with third party assessments. However, this did not impact the rating analysis.

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 7 August 2014, when the ratings for each class of Notes were confirmed.

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 lifetime base case Probability of Default (PD) and Loss Given Default (LGD) for the pool based on a review of current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.

-- In respect of Class A Notes, the Probability of Default (PD) of 2.28%, and Loss Given Default (LGD) of 50.00%.

-- The Risk Sensitivity overview below illustrates the ratings expected for the Class A Notes and the Class B Notes respectively, if the PD and LGD increase by a certain percentage over the Base Case assumption. For example, if the LGD increased by 50% the rating for the Class A Notes would be expected to remain at AAA (sf), all else being equal. If the PD increased by 50% the rating for the Class A Notes would be expected to remain at AAA (sf), all else being equal. If both the LGD and PD increase by 50%, the rating of the Class A Notes would be expected to decrease to AA (high) (sf), all else being equal.

Class A Notes 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 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 and 25% increase in LGD, expected rating of AAA (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf).

Class B Notes 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 PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (low)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (sf)

For further information on DBRS historic default rates published by the European Securities and Markets Administration 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: Alexander Garrod
Initial Rating Date: 25 July 2013
Initial Rating Committee Chair: Chuck Weilamann

Last Rating Date: 7 August 2015
Lead Surveillance Analyst: Vito Natale
Rating Committee Chair: Chuck Weilamann

DBRS Ratings Limited
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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
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Unified Interest Rate Model for European Securitisations

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375