OREANDA-NEWS. Fitch Ratings has assigned Driver Master S. A. Compartment 1's EUR1,067.6m class A and B notes' final ratings as follows:

EUR1,020.1m floating-rate, asset-backed class A series of notes, due May 2025: 'AAAsf'; Outlook Stable

EUR47.5m floating-rate, asset-backed class B series of notes, due May 2025: 'A+sf'; Outlook Stable

EUR56.6m subordinated loan, due May 2025: not rated

The transaction is a platform for Volkswagen Bank GmbH's (VWB, the seller) to securitise, on a revolving basis, German auto loan receivables.

The ratings are based on Fitch's assessment of VWB's origination and servicing procedures, Fitch's expectations of asset performance, the available credit enhancement (CE), and the transaction's legal structure.

KEY RATING DRIVERS

Low Default Expectation

Fitch has determined a default base-case expectation of 1.8% for the portfolio. The Fitch base case reflects the strong performance of prior Driver transactions and our expectation of a benign economic environment over the initial revolving period of 12 months and the subsequent amortisation period. To reflect the low default base case given the benign economic environment, the revolving period and the balloon risk, the agency applied a 'AAAsf' default multiple of 7.8x.

Portfolio Volatility Substantial

As in other Master transactions, the portfolio balance may fluctuate substantially during the revolving period, as regular tap-ups and take-outs occur. Asset and portfolio eligibility criteria and a note redemption mechanism based on portfolio quality reduce adverse consequences. The transaction documents foresee that tap-ups and take-outs can only be carried out in cases where the rating of the notes will not be lower than 'AAAsf' for class A and 'A+sf' for class B.

Minimum Credit Enhancement (CE)

The class A notes benefit from overcollateralisation (OC) of 10.3% and the class B notes from OC of 6.1% at the June 2016 closing date. However, the OC can decrease by 0.7pp during the revolving period for each class of notes (to 9.6% for class A and 5.4% for class B). If the OC drops below these thresholds, the transaction will start amortising. Additionally, the floor of the reserve fund (0.6% of the maximum pool balance) needs to be preserved for the revolving period to continue.

RATING SENSITIVITIES

Fitch tested the notes in various scenarios, under which model-implied sensitivities indicate that an increase in the base case default rate by 50% together with a decrease in the base case recovery rate by 50% may result in a downgrade of the class A notes, to 'A-sf' from 'AAAsf' and a downgrade of the class B notes, to 'BBB-sf' from 'A+sf'. Transaction related stresses and sensitivity analysis are further discussed in the New Issue report.

TRANSACTION CHARACTERISTICS

During the revolving period, further assets may be transferred or repurchased by the seller, subject to certain conditions. Further, different class A and B series can be issued or existing series' balances can be changed (due to take-out or tap-up).

At the end of the revolving period, each investor can opt to extend the revolving period for their series or initiate its amortisation. In case of an extension, the note margins as well as the maximum issuance amount may be amended. Fitch regularly monitors the activity of the platform during the revolving period and will perform a full rating analysis in case the revolving period is extended.

Assets will be purchased at a discount rate, creating OC. During the replenishment period, new receivables will be purchased at a purchase price discount for OC (1.9%). In the event of a tap-up, the new receivables will be purchased at a purchase price discount for OC of 0.95% and the cash reserve will also be funded with 1% of the further notes' balance. In both cases, the overall OC increases by the same amount.

In the event of a take-out of performing receivables, the redemption mechanism will ensure that the total CE increases to compensate for the relative increase of delinquent receivables.

In any case, the minimum OC levels of 9.6% for class A and 5.4% for class B need to be maintained for the revolving period to continue. Additionally, the floor of the reserve fund (0.6% of maximum pool balance ever achieved) needs to be preserved.

DUE DILIGENCE USAGE

Fitch was provided with a third party asset portfolio assessment in relation to this rating action.

DATA ADEQUACY

Fitch reviewed the results of the third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

Fitch also conducted a review of a small targeted sample of VWB 's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

Overall, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION

- Pool stratification data provided by VWB as at 31 May 2016

- Dynamic delinquency data from September 2008 to March 2016, for the overall loans book and split into new vs used cars.

- Loss vintage data, for the overall book and split into different sub-pools: new balloon, new amortising, used balloon, and used amortising. The data provided spans the period between January 2004 and March 2016.