DBRS Morningstar Upgrades and Confirms Ratings on VCL Multi-Compartment S.A., acting for and on behalf of its Compartment VCL 33

DBRS Ratings GmbH (DBRS Morningstar) took the following rating actions on the notes issued by VCL Multi-Compartment S.A., acting for and on behalf of its Compartment VCL 33 (the Issuer):

-- Class A Notes confirmed at AAA (sf)
-- Class B Notes upgraded to AAA (sf) from AA (sf)

The ratings on the Class A and Class B Notes address the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date in April 2027.

The rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the May 2023 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the notes to cover the expected losses at the AAA (sf) rating level.

The transaction is a static securitisation of German auto lease receivables originated and serviced by Volkswagen Leasing GmbH (VWL). The transaction closed in June 2021 with an initial EUR 1.0 billion collateral portfolio that consisted of auto lease receivables (excluding residual value claims relating to the final balloon instalment) granted to retail (82.5% of the discounted portfolio balance) and commercial (17.5%) customers.

PORTFOLIO PERFORMANCE
As of the May 2023 payment date, loans that were 30 to 60 days and 60 to 90 days delinquent represented 0.5% and 0.2% of the outstanding portfolio balance, respectively, while loans more than 90 days delinquent represented 0.7%. Cumulative net losses amounted to only 0.03% of the original portfolio balance to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and maintained its base case PD and LGD assumptions at 1.4% and 40.0%, respectively.

CREDIT ENHANCEMENT
Credit enhancement to the rated notes is provided by the subordination of the respective junior obligations and overcollateralisation. As of the May 2023 payment date, credit enhancement to the Class A Notes increased to 12.1% from 9.6% at the time of the previous annual review 12 months ago while credit enhancement to the Class B Notes increased to 7.4% from 6.1%.

The transaction benefits from liquidity support provided by a cash reserve, funded to EUR 12.0 million at closing, with a target amount equal to 1.2% of the outstanding discounted receivables balance, subject to a floor of 1.0% of the initial outstanding discounted receivables balance. The reserve is available to cover the payment of senior expenses, swap payments, and interest on the rated notes. As of the May 2023 payment date, the reserve was at its floor level of EUR 10.0 million.

The Bank of New York Mellon - Frankfurt Branch (BNYM Frankfurt) acts as the account bank for the transaction. Based on DBRS Morningstar’s private rating on BNYM Frankfurt, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the ratings assigned to the notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

Skandinaviska Enskilda Banken AB (SEB) acts as the swap counterparty for the transaction. DBRS Morningstar’s Long Term Critical Obligations Rating of AA on SEB is consistent with the first rating threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant impact on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https:\www.dbrsmorningstar.com\research\396929\dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology” (7 February 2023), https:\www.dbrsmorningstar.com\research\409485\master-european-structured-finance-surveillance-methodology.

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

DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https:\www.dbrsmorningstar.com\research\401817\global-methodology-for-rating-sovereign-governments.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https:\www.dbrsmorningstar.com\research\384482\baseline-macroeconomic-scenarios-application-to-credit-ratings.

The sources of data and information used for these ratings include investor reports provided by VWL and loan-level data provided by the European DataWarehouse GmbH.

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

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

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

DBRS Morningstar 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 24 June 2022, when DBRS Morningstar confirmed its rating on the Class A Notes at AAA (sf) and upgraded its rating on the Class B Notes to AA (sf) from AA (low) (sf).

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available at www.dbrsmorningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the ratings (the base case):

-- DBRS Morningstar expected a lifetime base case PD and 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 1.4% and 40.0%, 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 on the Class A Notes would be expected to remain at AAA (sf), ceteris paribus. If the PD increases by 50%, the rating on 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 on the Class A Notes would be expected to fall to AA (sf).

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 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 AA (low) (sf)

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https:\cerep.esma.europa.eu\cerep-web\statistics\defaults.xhtml. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https:\data.fca.org.uk#\ceres\craStats.

These ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Daniel Rakhamimov, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 5 May 2021

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main Deutschland
Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

The rating methodologies used in the analysis of this transaction can be found at: https:\www.dbrsmorningstar.com\about\methodologies.

-- Legal Criteria for European Structured Finance Transactions (22 July 2022), https:\www.dbrsmorningstar.com\research\400166\legal-criteria-for-european-structured-finance-transactions.
-- Master European Structured Finance Surveillance Methodology (7 February 2023), https:\www.dbrsmorningstar.com\research\409485\master-european-structured-finance-surveillance-methodology.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (17 May 2022), https:\www.dbrsmorningstar.com\research\396929\dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2022), https:\www.dbrsmorningstar.com\research\402774\operational-risk-assessment-for-european-structured-finance-servicers.
-- Rating European Consumer and Commercial Asset-Backed Securitisations (19 October 2022),
https:\www.dbrsmorningstar.com\research\404212\rating-european-consumer-and-commercial-asset-backed-securitisations.
-- Rating European Structured Finance Transactions Methodology (15 July 2022),
https:\www.dbrsmorningstar.com\research\399899\rating-european-structured-finance-transactions-methodology.
-- Interest Rate Stresses for European Structured Finance Transactions (22 September 2022), https:\www.dbrsmorningstar.com\research\402943\interest-rate-stresses-for-european-structured-finance-transactions.
-- Derivative Criteria for European Structured Finance Transactions (20 September 2021), https:\www.dbrsmorningstar.com\research\384624\derivative-criteria-for-european-structured-finance-transactions.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at https:\www.dbrsmorningstar.com\research\278375.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].