DBRS Assigns Ratings to VCL Master S.A., acting through its Compartment 1

DBRS Ratings Limited (DBRS) has today assigned ratings to VCL Master S.A., acting through its Compartment 1 (the issuer), as follows:

-- 2010-1, Class A Notes at AAA (sf)
-- 2010-2, Class A Notes at AAA (sf)
-- 2010-4, Class A Notes at AAA (sf)
-- 2011-2, Class A Notes at AAA (sf)
-- 2012-1, Class A Notes at AAA (sf)
-- 2012-2, Class A Notes at AAA (sf)
-- 2012-3, Class A Notes at AAA (sf)
-- 2012-4, Class A Notes at AAA (sf)
-- 2013-1, Class A Notes at AAA (sf)
-- 2013-2, Class A Notes at AAA (sf)
-- 2015-1, Class A Notes at AAA (sf)
-- 2014-1, Class B Notes at A (high) (sf)
-- 2014-2, Class B Notes at A (high) (sf)
-- 2014-3, Class B Notes at A (high) (sf)
-- 2014-4, Class B Notes at A (high) (sf).

The notes are backed by a EUR 1.4 billion pool of receivables related to motor vehicle lease contracts originated by Volkswagen Leasing GmbH (VWL).

The notes of the existing series were issued in the context of a securitisation programme. The issuer may issue further series of Class A Notes and Class B Notes subject to the provisions of the programme documents. DBRS may also assign ratings to the further notes of both classes belonging to the new series when issued and such ratings will be published on www.dbrs.com. The issuance of subsequent series of Class A Notes and/or Class B Notes will be subject to compliance with some conditions specified in the programme documents.

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

-- The programme’s capital structure and form and sufficiency of available credit enhancement.
-- Credit enhancement in the form of subordination, overcollateralisation and a fully funded liquidity reserve from the issuance date.
-- Credit enhancement levels are sufficient to support the expected cumulative net loss assumption projected under various stress scenarios at a AAA (sf) and A (high) (sf) standard for the series of Class A Notes and Class B Notes, respectively.
-- The ability of the structure to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested.
-- The programme counterparties’ capabilities with regard to originations, underwriting, servicing and its financial strength.
-- DBRS conducted an operational risk review of VWL at their premises in Brunswick, Germany and deems it to be an acceptable servicer.
-- The credit quality and industry diversification of the collateral and historical and projected performance of the seller’s portfolio.
-- The sovereign rating of Germany, currently at AAA.
-- 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.

The transaction was modelled in Intex DealMaker.

Notes:
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.

Other methodologies 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 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 these ratings include performance data relating to receivables provided by VWL directly or through their agents, Volkswagen Financial Services AG and HSBC Bank plc. DBRS received historical net loss data relating to VWL’s originations by monthly vintages on a cumulative basis dating back to 2002. Data was also provided relating to delinquencies and prepayments dating back to 2010. A detailed summary and an amortisation schedule were provided for the portfolio selected by VWL as at 31 August 2016 that allowed DBRS to further assess the collateral. 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.

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.

These ratings concern already issued financial instrument. This is the first DBRS rating on this financial instrument.

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 (the “Base Case”):

-- Probability of Default (PD): Base Case of 1.77%, a 25% and 50% increase on Base Case PD.
-- Loss Given Default (LGD) of 42% for the Class A Notes and 51% for the Class B Notes, a 25% and 50% increase on LGDs.

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 not lead to a change of the Class A Notes.
-- A hypothetical increase of the base case PD by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to AA (high) (sf).
-- 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 (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 (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 A notes to AA (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 (high) (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 a downgrade of the Class B Notes to BBB (high) (sf).
-- A hypothetical increase of the base case PD by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to BBB (high) (sf).
-- A hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to BBB (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 BBB (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 B notes to BBB (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 B notes to BBB (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 B notes to BB (sf).

For further information on DBRS historic default rates published by the European Securities and Markets Authority (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, Senior Vice President
Initial Rating Date: 26 September 2016
Initial Rating Committee Chair: Chuck Weilamann, Managing Director

DBRS Ratings Limited
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United Kingdom
Registered in England and Wales: No. 7139960

The rating methodologies used in the analysis of this transaction are listed below:

-- Rating European Consumer and Commercial Asset-Backed Securitisations (30 September 2015)
-- Legal Criteria for European Structured Finance Transactions (14 September 2016)
-- Derivative Criteria for European Structured Finance Transactions (19 February 2016)
-- Operational Risk Assessment for European Structured Finance Servicers (31 December 2015)
-- Operational Risk Assessment for European Structured Finance Originators (15 December 2015)
-- Unified Interest Rate Model for European Securitisations (12 October 2015)

The rating methodologies used in the analysis of this transaction can be found at:
http://www.dbrs.com/about/methodologies

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