DBRS Confirms Ratings of VCL Master S.A., acting with respect to its Compartment 1

DBRS Ratings GmbH (DBRS) confirmed the ratings on the notes issued by VCL Master S.A., acting with respect to its Compartment 1 (the Issuer) as follows (the Notes):

-- Series 2010-2, Class A Notes at AAA (sf)
-- Series 2010-4, Class A Notes at AAA (sf)
-- Series 2011-2, Class A Notes at AAA (sf)
-- Series 2012-1, Class A Notes at AAA (sf)
-- Series 2012-2, Class A Notes at AAA (sf)
-- Series 2012-3, Class A Notes at AAA (sf)
-- Series 2012-4, Class A Notes at AAA (sf)
-- Series 2013-1, Class A Notes at AAA (sf)
-- Series 2015-1, Class A Notes at AAA (sf)
-- Series 2017-1, Class A Notes at AAA (sf)
-- Series 2017-2, Class A Notes at AAA (sf)
-- Series 2017-3, Class A Notes at AAA (sf)
-- Series 2018-1, Class A Notes at AAA (sf)
-- Series 2014-1, Class B Notes at AA (sf)
-- Series 2014-3, Class B Notes at AA (sf)
-- Series 2014-4, Class B Notes at AA (sf)
-- Series 2018-1, Class B Notes at AA (sf)

The ratings address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date of the Notes in September 2026.

The rating actions follow a review of the transaction upon the execution of an amendment agreement that includes:

-- Updated margins on the Notes;
-- New hedging agreements for the Notes;
-- A 12-month extension of the revolving period for the Notes through to September 2020;
-- Updated overcollateralisation target levels on the Notes; and
-- Updated credit enhancement increase conditions.

The Issuer is a securitisation of lease receivables related to motor vehicle lease contracts originated by Volkswagen Leasing GmbH (VWL) in Germany. The residual values are not securitised.

The ratings are based on DBRS’s review of the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults.
-- The programme’s capital structure, including form and sufficiency of available credit enhancement (CE) to the Notes.
-- CE in the form of subordination, overcollateralisation and a fully funded liquidity reserve.
-- CE levels are sufficient to support the expected cumulative net loss assumption projected under various stress scenarios at the AAA (sf) and AA (sf) rating levels 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 its 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 the Federal Republic of Germany, currently rated AAA with a Stable trend by DBRS.
-- The consistency of the transaction’s legal structure with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology and presence of legal opinions addressing the assignment of the assets to the Issuer.
-- The consistency of the transaction’s hedging agreements with DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

The transaction’s cash flow structure was analysed in Intex DealMaker

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings 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.

An asset and a cash flow analysis were both conducted. 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 “Global Methodology for Rating Sovereign Governments” at: http://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include historical performance data relating to receivables provided by VWL directly or through its agent, Credit Agricole Corporate and Investment Bank, monthly investor reports provided by VWL and legal documentation provided by the Issuer’s legal counsel.

DBRS did 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 considers the data and information available to it for the purposes of providing these ratings to be 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 September 2018, when DBRS confirmed the ratings of the Class A notes at AAA (sf) and Class B notes at AA (sf).

The lead analyst responsibilities for this transaction have been transferred to Daniel Rakhamimov.

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 ratings, DBRS considered the following stress scenarios, as compared to the parameters used to determine the ratings (the Base Case):

-- Probability of default (PD) rate used: Base Case PD of 1.40%, a 25% and 50% increase on the Base Case PD was tested.
-- Losses given default (LGD) rates used: LGD of 60% at the AAA (sf) stress level and 50% at the AA (sf) stress level, a 25% and 50% decrease in the Base Case LGD was tested.
-- 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 remain at AAA (sf), ceteris paribus. If the PD increases by 50%, the rating of the Class A notes would be expected to remain at AAA (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A notes would also be expected to decrease to AA (sf), ceteris paribus.

Class A notes risk sensitivity: -- 25% increase in LGD, expected rating of AAA (sf) -- 50% increase in LGD, expected rating of AAA (sf) -- 25% increase in PD, expected rating of AAA (sf) -- 50% increase in PD, expected rating of AAA (sf) -- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf) -- 25% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf) -- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf) -- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)
Class B notes risk sensitivity: -- 25% increase in LGD, expected rating of AA (sf) -- 50% increase in LGD, expected rating of AA (sf) -- 25% increase in PD, expected rating of AA (sf) -- 50% increase in PD, expected rating of AA (sf) -- 25% increase in PD and 25% increase in LGD, expected rating of AA (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 AA (sf)

For further information on DBRS historical 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 GmbH are subject to EU and US regulations only.

Lead Analyst: Daniel Rakhamimov, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 26 September 2016

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Geschäftsführer: Detlef Scholz
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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.