Fitch Affirms Three German VCL Master Series; Withdraws Ratings
Fitch has chosen to withdraw the ratings of VCL Master C1, VCL Master RV C1 and VCL Master RV C2 for commercial reasons.
The VCL Master C1 transaction is a securitisation of lease instalments, while the VCL Master RV 1 and 2 are securitisations of residual values from lease contracts.
KEY RATING DRIVERS
Performance in Line with Expectations
The individual performance data from each of the three transactions has been solid so far. The defaults and the recoveries have been better than expected in the VCL Master C1. For the VCL Master RV C1 and C2, stable car prices and the RV setting policy of VWL are supporting initial assumptions. The expectation of a benign economic environment in Germany over the near-to medium-term further supports the performance.
Portfolio Volatility Substantial
As is typical for master structures, the portfolios' balances may fluctuate substantially, as regular taps and take-outs occur. Asset and portfolio eligibility criteria as well as a note redemption mechanism based on portfolio quality reduce adverse consequences.
Credit Enhancement (CE)
Fitch factored in only the minimum CE in its analysis for the three transactions, since any level lower leads to an amortisation in sequential order. During the replenishment phase, the CE has increased due to a higher purchase price discount.
The minimum OC levels for the respective classes A and B are 13.6% and 10.1% for VCL Master C1, while these levels are higher at 44.5% and 34% for VCL Master RV C1 and 46.7% and 34.7% for VCL Master RV C2.
Manipulated Diesel Engine Software
In late 2015, it became public that VW AG programmed the software in cars with the EA189 engine type to manipulate emission test results. Since then the agency accounts for affected vehicles due to the heightened uncertainty around the used car prices by imposing a discount of 10% on the sales proceeds/recoveries of affected cars. The discount has been maintained since a year, because a large share of cars remains unfixed and the scrutiny of the issue by courts in several countries has increased over the past months.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
For VCL Master C1:
Fitch did not undertake a review of the information provided about the underlying asset pool ahead of the transaction's initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.
For VCL Master RV C1 and C2:
Prior to the transactions' closings, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information and concluded that there were no findings that affected the rating analysis.
Prior to the transactions' closings, Fitch conducted a review of a small targeted sample of the originator'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.
For VCL Master C1, VCL Master RV C1 and C2
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. There were no findings that affected the rating analysis. Fitch has not reviewed the results of third party assessments of the asset portfolio information or conducted a review of origination files in the context of the rating actions summarised above. Fitch regularly conducts reviews of small targeted samples of the originator's origination files.
Overall and together with the assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.
SOURCES OF INFORMATION
The information below was used in the analysis.
-Loan-by-loan data provided by European Data Warehouse as at 31 July 2016
-Transaction reporting provided by Volkswagen Leasing GmbH as at 31 July 2016