DBRS Finalises Provisional Ratings of Driver UK Multi-Compartment S.A. - Compartment Driver UK Three

DBRS Ratings Limited (DBRS) has today finalised its provisional ratings of AAA (sf) and A (high) (sf) of the Class A Notes and Class B Notes issued by Driver UK Multi-Compartment S.A. - Compartment Driver UK Three. The securitised receivables consist of hire purchase and personal contracts purchase loans granted for the purchase of motor vehicles.

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 reserve fund, subordination and overcollateralisation. Credit enhancement levels are sufficient to support the DBRS-projected expected cumulative net loss and residual value assumptions under various stress scenarios at a AAA (sf) standard for the Class A Notes and an A (high) (sf) standard for the Class B Notes issued by Driver UK Multi-Compartment S.A. acting for and on behalf of its Compartment Driver UK three.
-- 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 legal structure and presence of legal opinions addressing the assignment of the assets to the issuer and the consistency with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in GBP unless otherwise noted.

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

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 Volkswagen Financial Services (UK) Limited via the Co-Arrangers, Volkswagen Financial Services AG and Lloyds Bank plc. DBRS received historical performance data relating to Volkswagen Financial Services (UK) Limited originations by monthly vintage on a cumulative net loss and default basis going back to July 2002. Data was also provided relating to delinquencies, vehicle return realisation rates and portfolio stratification tables that allowed DBRS to further assess the portfolio. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not rely upon third-party due diligence in order to conduct its analysis.

DBRS was supplied with third-party assessments. However, this did not impact the rating analysis.

The full 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 the changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating:

-- Probability of Default Rate Used: base case PD of 6.53%, a 25% and 50% increase on the base case PD.
-- Recovery Rate Used: base case Recovery Rate of 72.5%.
-- Residual Value Loss: For Class A a stress residual value of 42% and for Class B a stressed residual value of 31%. In both instances a 25% and 50% increase in Residual Value Loss.

DBRS concludes that for the Class A Notes:

-- A hypothetical increase of the base case PD and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to a AA (High) (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to a AA (Low) (sf) rating.
-- A hypothetical increase of the base case Residual Value Loss by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to a AA (High) (sf) rating.
-- A hypothetical increase of the base case Residual Value Loss by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to a AA (Low) (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 25% and a hypothetical increase of the Residual Value Loss by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to a AA (Low) (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50% and a hypothetical increase of the Residual Value Loss by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to a A (High) (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 25% and a hypothetical increase of the Residual Value Loss by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to a A (High) (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50% and a hypothetical increase of the Residual Value Loss by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to a A (sf) rating.

DBRS concludes that for the Class B Notes:

-- A hypothetical increase of the base case PD and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to an A (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to an A (Low) (sf) rating.
-- A hypothetical increase of the base case Residual Value Loss by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to an A (sf) rating.
-- A hypothetical increase of the base case Residual Value Loss by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to an A (Low) (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 25% and a hypothetical increase of the Residual Value Loss by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to an A (Low) (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50% and a hypothetical increase of the Residual Value Loss by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to an BBB (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 25% and a hypothetical increase of the Residual Value Loss by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to an BBB (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50% and a hypothetical increase of the Residual Value Loss by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to an BB (High) (sf) rating.

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: Eric Levassor
Initial Rating Date: 1 September 2015
Initial Rating Committee Chair: Chuck Weilamann

Last Rating Date: 1 September 2015

Lead Surveillance Analyst: Vito Natale
Rating Committee Chair: Chuck Weilamann

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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.

-- Rating European Consumer and Commercial Asset-Backed Securitisations.
-- 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.