DBRS Confirms Ratings on Driver France FCT acting exclusively through the Compartment Driver France Two

DBRS Ratings Limited (DBRS) has today taken the following rating actions on the bonds issued by Driver France FCT acting exclusively through the Compartment Driver France Two (the Issuer):

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

The rating actions on the Class A and Class B Notes are based on the following analytical considerations as described more fully below:

-- Portfolio performance, in terms of delinquencies and defaults, as of March 2016.
-- Updated default, recovery and loss assumptions on the remaining receivables.
-- Current available credit enhancement to the Class A and Class B Notes to cover the expected losses at the AAA (sf) and A (high) (sf) rating levels, respectively.

The Issuer is a securitisation of French auto loans originated and serviced by the French branch of Volkswagen Bank, GmbH.

As of March 2016, two- to three-month arrears were at 0.22% and the 90+ delinquency ratio was at 0.20%. The current cumulative net loss ratio is at zero.

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 (OC) reaches its target level of 11.00%. As of the March 2016 payment date, Class A OC was at 11.00%. Class B OC was at 6.87%.

The transaction benefits from a Cash Reserve Fund, currently at the target level of EUR 5.00 million. The Cash Reserve Fund covers senior fees, Class A and Class B interest and principal losses on the final payment date.

BNP Paribas SA is the account bank for the transaction. The account bank reference rating of AA – being one notch below the DBRS public Long-Term Critical Obligations Rating of BNP Paribas SA of AA (high) – complies with the Minimum Institution Rating, given the rating assigned to the Class A Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology. DZ BANK AG Deutsche Zentral-Genossenschaftsbank (DZ Bank) is the swap counterparty for the transaction. DBRS’s public rating of DZ Bank is above the First Rating Threshold as described in DBRS’s 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. 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’s 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 may be found on www.dbrs.com at http://www.dbrs.com/about/methodologies.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to the DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” found at 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 Bank GmbH.

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 30 June 2015, when DBRS finalised its provisional ratings of AAA (sf) on the Class A Notes and A (high) (sf) on the Class B Notes. The lead responsibilities for this transaction have been transferred to Andrew Lynch.

Information regarding DBRS ratings, including definitions, policies and methodologies is available at www.dbrs.com.
To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with 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 the current assets. 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 loans for the Issuer are 1.34% and 51.75%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base-case assumption. For example, if the LGD increases by 50%, the rating of the Class A Notes would be expected to fall to AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to fall to AA (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to fall to A (high) (sf).

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

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf).
-- 50% increase in LGD, expected rating of A (high) (sf).
-- 25% increase in PD, expected rating of A (high) (sf).
-- 50% increase in PD, expected rating of A (high) (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of A (low) (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (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: Eric Levassor
Initial Rating Date: 26 May 2015
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Andrew Lynch, Senior Financial Analyst
Rating Committee Chair: Diana Turner, Senior Vice President

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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 (February 2016)
-- Master European Structured Finance Surveillance Methodology (April 2016)
-- Operational Risk Assessment for European Structured Finance Servicers (December 2015)
-- Rating European Consumer and Commercial Asset-Backed Securitisations (October 2015)
-- Unified Interest Rate Model for European Securitisations (October 2015)
-- Derivative Criteria for European Structured Finance Transactions (February 2016)

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.