Morningstar DBRS Finalizes Its Provisional Credit Ratings on VCL Multi-Compartment S.A., acting for and on behalf of its Compartment VCL 44

DBRS Ratings GmbH (Morningstar DBRS) finalized its provisional credit ratings on the following classes of notes issued by VCL Multi-Compartment S.A., acting for and on behalf of its Compartment VCL 44 (the Issuer):

-- Class A Notes at AAA (sf)
-- Class B Notes at AA (low) (sf)

The credit ratings on both the Class A Notes and Class B Notes (together, the Notes) address the timely payment of scheduled interest and the ultimate repayment of principal by the legal maturity date.

CREDIT RATING RATIONALE
The transaction represents the issuance of the Notes, backed by a portfolio of approximately EUR 1.25 billion in receivables related to auto leases granted by Volkswagen Leasing GmbH (VWL; the Seller and the Originator), a wholly owned, indirect subsidiary of Volkswagen AG, to lessees who reside or are incorporated in the Federal Republic of Germany. The underlying motor vehicles related to the auto leases consist of both new and used passenger and light-commercial vehicles. VWL also services the receivables (the Servicer).

Morningstar DBRS' credit ratings are based on the following analytical considerations:
-- The transaction's structure, including the form and sufficiency of available credit enhancement to withstand stressed cash flow assumptions and repay the Issuer's financial obligations according to the terms under which the Notes have been issued;
-- The credit quality of VWL's portfolio, the characteristics of the collateral, its historical performance, and Morningstar DBRS-projected behaviour under various stress scenarios;
-- VWL's capabilities with respect to originations, underwriting, and servicing and its position in the market and financial strength;
-- The operational risk review of VWL, which Morningstar DBRS deems to be an acceptable servicer;
-- The transaction parties' financial strength with regard to their respective roles;
-- The consistency of the transaction's structure with Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions";
-- The sovereign rating on the Federal Republic of Germany, currently at AAA with a Stable trend by Morningstar DBRS.

TRANSACTION STRUCTURE
The transaction incorporates a single waterfall that governs the allocation of the available distribution amount consisting of, among others, collections representing interest, principal, and recoveries. The transaction documents foresee a mixed sequential/pro rata amortisation structure; initially, all collections from the lease receivables will pay down the Class A Notes. Once the Class A overcollateralisation (OC) percentage reaches 12.25%, the Class B Notes will begin to amortise. Once the Class B OC percentage reaches 7.5%, principal payments on the Notes will be allocated on a pro rata basis, unless prespecified performance triggers on cumulative net loss (CNL) ratio are breached, as outlined in the transaction documents.

The transaction benefits from liquidity support provided by a cash reserve with an initial balance of EUR 15,000,000 million, which is equal to 1.2% of the initial outstanding discounted receivables balance. The target balance of the reserve on subsequent payment dates is the higher of 1.2% of the aggregate discounted receivables balance and the lower of (1) EUR 12,500,000 million or (2) the aggregate outstanding principal amount of the Notes. The reserve is available to cover the payment of senior expenses, swap payments, and interest on the Notes. The reserve also provides credit enhancement to the Notes and is available to repay principal on the Notes when the portfolio's aggregate discounted receivables balance reaches zero.

COUNTERPARTIES
Citibank Europe plc, Germany branch (Citibank) has been appointed to act as the account bank for the transaction. Morningstar DBRS has a private credit rating on Citibank, which meets its criteria to act in such capacity. The transaction documents contain downgrade provisions relating to the account bank that are consistent with Morningstar DBRS' criteria.

Skandinaviska Enskilda Banken AB (SEB) has been appointed as the swap counterparty for the transaction. Morningstar DBRS public Long-Term Critical Obligation Rating on SEB is AA (high) with a stable trend, which meets Morningstar DBRS criteria to act in such capacity. The hedging documents contain downgrade provisions consistent with Morningstar DBRS' criteria.

Morningstar DBRS' credit ratings on the Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. For the Notes listed in the table, the associated financial obligations are the Class A Notes' interest due, Class B Notes' interest due, Class A Notes principal payment amount, and Class B Notes principal payment amount.

Morningstar DBRS' credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August, 2024) https://dbrs.morningstar.com/research/437781.

Morningstar DBRS analysed the transaction structure in Intex Dealmaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to these credit ratings is: Rating European Consumer and Commercial Asset-Backed Securitisations (18 September 2024), https://dbrs.morningstar.com/research/439583.

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

Morningstar 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.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to "Appendix C: The Impact of Sovereign Credit Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" (15 July 2024) at: https://dbrs.morningstar.com/research/436000.

The sources of data and information used for these credit ratings include the Originator and its agents. Morningstar DBRS received:
-- Static CNL data (adjusted) from January 2019 and up to September 2024 provided on a total portfolio basis and split by Used/New subsets,
-- Total portfolio level delinquency data from January 2010 to September 2024, and
-- Total dynamic loss ratio data from March 2011 to September 2024.

Morningstar DBRS also received stratification tables in relation to the final portfolio as at 31 January 2025 as well as the related amortisation schedule.

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

Morningstar DBRS was supplied with third-party assessments. However, this did not affect the credit rating analysis.

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

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

These credit ratings concern newly issued financial instrument. These are the first Morningstar DBRS credit ratings on this financial instrument.

This is the first credit rating action since the Initial Rating Date.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com.

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

-- Expected probability of default (PD) rate: 1.1%
-- Expected recovery rate: 60.0%
-- Loss given default (LGD): 61.6% for the AAA (sf) scenario and 57.3% for the AA (low) (sf) scenario

Scenario 1: 25% increase in LGD
Scenario 2: 50% increase in LGD
Scenario 3: 25% increase in PD
Scenario 4: 50% increase in PD
Scenario 5: 25% increase in PD and 25% increase in LGD
Scenario 6: 25% increase in PD and 50% increase in LGD
Scenario 7: 50% increase in PD and 25% increase in LGD
Scenario 8: 50% increase in PD and 50% increase in LGD

Morningstar DBRS concludes that the expected credit ratings under the eight stress scenarios would be:
-- Class A Notes: AA (high) (sf), AA (high) (sf), AA (high) (sf), AA (sf), AA (sf), AA (sf), AA (sf), and A (high) (sf)
-- Class B Notes: AA (low) (sf), A (high) (sf), AA (low) (sf), A (high) (sf), A (sf), A (sf), A (sf), and BBB (high) (sf)

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

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

Lead Analyst: Sergio Rodas, Senior Analyst
Rating Committee Chair: Paolo Conti, Associate Managing Director
Initial Rating Date: 13 January 2025

DBRS Ratings GmbH, Sucursal en España
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The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Rating European Consumer and Commercial Asset-Backed Securitisations (18 September 2024). https://dbrs.morningstar.com/research/439583
-- Rating European Structured Finance Transactions Methodology (19 November 2024),
https://dbrs.morningstar.com/research/443199
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024),
https://dbrs.morningstar.com/research/443196
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024),
https://www.dbrsmorningstar.com/research/439571
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024),
https://www.dbrsmorningstar.com/research/439913
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024), https://dbrs.morningstar.com/research/437781

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/439604.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.