DBRS Assigns Provisional Ratings to VCL Multi-Compartment S.A. acting through its Compartment VCL 22

DBRS Ratings Limited (DBRS) has today assigned a provisional AAA (sf) rating and a provisional A (high) (sf) rating to the Class A and Class B Notes, respectively, to be issued by VCL Multi-Compartment S.A. acting for and on behalf of its Compartment VCL 22. The receivables to be securitised consist of leases related to motor vehicles originated by Volkswagen Leasing GmbH in Germany.

The ratings are based on 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 and subordination. Credit enhancement levels are sufficient to support the DBRS-projected expected cumulative net loss (CNL) assumption 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 VCL Multi-Compartment S.A. acting for and on behalf of its Compartment VCL 22.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under 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 the DBRS “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros 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 Leasing GmbH and Volkswagen Financial Services AG. DBRS received historical performance data relating to Volkswagen Leasing GmbH originations by monthly vintage on a CNL basis going back to January 2002. Data was also provided relating to delinquencies and portfolio stratification tables that allowed DBRS to further assess the portfolio.

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

DBRS has not yet been 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.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

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.

This rating was disclosed to Volkswagen Financial Services AG and HSBC and amended following that disclosure before being assigned.

DBRS is aware of some regulatory matter that exists regarding some VW-manufactured diesel engines. Based on data, information and performance data to date, for the subject transaction, DBRS believes that the structural protections in the VW-sponsored securitisations are sufficient to support the ratings assigned. For additional information, please see:
http://www.dbrs.com/research/285127/dbrs-comments-on-potential-impact-of-volkswagen-negative-review-on-european-structured-finance-transactions.html

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 changing the transaction parameters on the ratings, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (the base case):

-- Probability of default (PD) rate used: base-case PD of 1.88%, a 25% and 50% increase on the base-case PD.
-- Recovery rate used: base-case recovery rate of 50%.
-- Loss given default (LGD) rate used: base-case LGD of 50%, a 25% and 50% increase on the base-case LGD.

DBRS concludes that, for the Class A Notes:

-- A hypothetical increase of the base-case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to maintaining the rating of the Class A Notes at AAA (sf).
-- A hypothetical increase of the base-case PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to AA (high) (sf).
-- A hypothetical increase of the base-case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to AA (high) (sf).
-- A hypothetical increase of the base-case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to AA (low) (sf).
-- A hypothetical increase of the base-case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class AA (low) Notes to A (low) (sf).
-- A hypothetical increase of the base-case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to A (sf).

DBRS concludes that, for the Class B Notes:

-- A hypothetical increase of the base-case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to maintaining the rating of the Class B Notes at A (high) (sf).
-- A hypothetical increase of the base-case PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to maintaining the rating of the Class B Notes at A (high) (sf).
-- A hypothetical increase of the base-case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to A (low) (sf).
-- A hypothetical increase of the base-case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to BBB (sf).
-- A hypothetical increase of the base-case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to BBB (sf).
-- A hypothetical increase of the base-case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to BBB (low) (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: Paolo Conti
Initial Rating Date: 19 October 2015
Initial Rating Committee Chair: Chuck Weilamann

Last Rating Date: Not applicable

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

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