DBRS Confirms Ratings on Driver Master SA – Compartment 1

DBRS Ratings Limited (DBRS) confirmed the ratings of the Class A and Class B Notes (the Notes) issued by Driver Master SA - Compartment 1 (the Issuer) as follows:

-- Series 2015-1, Class A Notes at AAA (sf)
-- Series 2015-2, Class A Notes at AAA (sf)
-- Series 2015-3, Class A Notes at AAA (sf)
-- Series 2015-4, Class A Notes at AAA (sf)
-- Series 2015-5, Class A Notes at AAA (sf)
-- Series 2015-6, Class A Notes at AAA (sf)
-- Series 2015-7, Class A Notes at AAA (sf)
-- Series 2015-8, Class A Notes at AAA (sf)
-- Series 2015-9, Class A Notes at AAA (sf)
-- Series 2015-1, Class B Notes at A (high) (sf)
-- Series 2015-2, Class B Notes at A (high) (sf)
-- Series 2015-3, Class B Notes at A (high) (sf)

DBRS had previously assigned, finalised and confirmed, as the case may be, the aforementioned ratings on 19 June 2015, 27 July 2015, 25 November 2015, 27 June 2016, 26 June 2017 and 25 June 2018. This rating action follows the execution of amendments to the transaction documents that include, amongst others:

-- An extension of the revolving period of the existing non-amortising series of notes for a further 12 months (a new expiry date of June 2020);
-- An extension of the scheduled repayment date to May 2027;
-- An extension of the final maturity date to May 2028;
-- An amendment to part of the Credit Enhancement Increase Condition definition whereby the seasoning-dependent cumulative net loss trigger has been replaced with a portfolio-wide 12month dynamic average net loss ratio of 0.25%;
-- The repurchase of certain previously sold receivables from the Issuer by Volkswagen Bank GmbH (VWB) with the aim of satisfying the requirements for simple, transparent and standardised securitisations; and
--Skandinaviska Enskilda Banken AB (SEB) has been appointed as the swap counterparty for all the non-amortising notes. DBRS publicly rates SEB’s long-term senior debt at A (high) and considers it to be an eligible swap counterparty.

Except for the amortising Series 2015-2 Class A Notes and the Series 2015-1 Class B Notes, the following amendments apply to the non-amortising notes:

-- Class A Note margin: one-month Euribor + 0.25%;
-- Class B Note margin: one-month Euribor + 0.70%;
-- Class A swap fixed rate: 0.03%; and
-- Class B swap fixed rate: 0.28%.

As per the latest reporting period, the Notes are backed by a EUR 239 million pool of receivables related to auto loan contracts granted by VWB to private and commercial customers in Germany.

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

-- The transaction’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 Class A Notes and Class B Notes, respectively.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested.
-- VWB’s experience as an originator, underwriter and servicer, and the financial strength of the multi-national motor company it is a part of.
-- The credit quality of the underlying collateral and the ability of VWB 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 euros unless otherwise noted.

The principal methodology applicable is “Rating 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.

Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.

Other methodologies referenced in this transaction are listed at the end of this press release.

These 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 “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: https://www.dbrs.com/research/333487/ratingsovereign-governments.

The sources of data and information used for these ratings include performance data relating to receivables sourced by VWB directly or through its agents, Commerzbank AG and Volkswagen Financial Services AG. DBRS received data relating to delinquencies, prepayments and early settlements that allowed DBRS to further assess the collateral.

All information was made available through the monthly investor report.

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

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

DBRS considers the data and information available to it for the purposes of providing these ratings were of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on this transaction took place on 25 June 2018 when DBRS confirmed the ratings on the Class A and Class B Notes.

Information regarding DBRS ratings, including definitions, policies and methodologies, is 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):
-- Expected Default: Base Case of 2.1%, a 25% and 50% increase on Base Case Probability of Default (PD).
-- Recovery Rate Used: Base Case Recovery Rate of 60%, with 36% and 44% Recovery Rates applied to the AAA (sf) and A (high) (sf) scenarios, respectively.
-- Loss Given Default (LGD): Base Case LGD of 40%, with 64% and 56% Recovery Rates applied to the AAA (sf) and A (high) (sf) scenarios, respectively, both with 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 not lead to a downgrade of the Class A Notes.
-- 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 (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 not lead to a downgrade of the Class B Notes.
-- A hypothetical increase of the Base Case PD by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to A (low) (sf).
-- A hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to A (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 (high) (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 (high) (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 (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/cerepweb/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.

Lead Analyst: Alex Garrod, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director, Head of European Structured Finance
Initial Rating Date: 19 June 2015

DBRS Ratings Limited
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London EC3M 3BY United Kingdom
Registered and incorporated under the laws of England and Wales: Company No. 7139960.

The rating methodologies 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
-- Operational Risk Assessment for European Structured Finance Originators
-- Interest Rate Stresses for European Structured Finance Transactions

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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.