OREANDA-NEWS. Fitch Ratings has assigned Driver thirteen UG (haftungsbeschraenkt)'s EUR717m class A and B notes the following ratings:

EUR691.5m floating-rate, asset-backed class A notes (ISIN: XS1158325909), due February 2021: 'AAAsf'; Outlook Stable
EUR25.5m floating-rate, asset-backed class B notes (ISIN: XS1158338712), due February 2021: 'A+sf'; Outlook Stable
EUR27.8m subordinated loan, due February 2021: 'NRsf'

The transaction is a securitisation of auto loan receivables originated by Volkswagen Bank GmbH (VWB) within Germany, predominantly to retail clients.

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

KEY RATING DRIVERS
Initial CE for the class A notes is 8.8% and for the class B notes 5.4%. For the class A notes, CE is provided by: (i) overcollateralisation (OC) of 0.7% of the portfolio balance; (ii) OC from receivables financed by the proceeds of the subordinated loan (3.7%); (iii) the floor amount of the amortising cash reserve fund (1%); and (iv) OC from receivables financed by the proceeds of the class B notes (3.4%). Components (i) to (iii) make up CE for the class B notes.

Default Expectation Among Lowest
Fitch has determined a default base case expectation of 1.7% for the transaction portfolio. This figure is at the lower end of expected default rates among peer transactions. The assigned base case reflects the better than expected performance of prior Driver transactions, and our expectation of a benign economic environment over the transaction's lifetime.

Above-Average Balloon Exposure
Forty-four per cent of the securitised portfolio comprises balloon principal paid at the receivables' maturity dates. Fitch considers this share to be high compared with peer transactions. The agency accounted for the risk arising from obligors' potential inability to cover balloon payments at contract maturity by increasing the default stress multiples.

Seller-Related Risks Present
VWB undertakes to reimburse the issuer for several seller-related risk factors as regards the sold receivables, including reimbursements for potential set-off and prepayment losses. In case VWB is unable to indemnify the issuer, the transaction will be exposed to losses from such risks.

No Back-Up Servicer (BUS)
At closing, no BUS is in place, as per previous Driver transactions. The transaction documents are vague regarding the appointment of a replacement servicer upon a potential default of VWB. A liquidity reserve was funded at the closing date to mitigate risks from potential servicing disruption.

RATING SENSITIVITIES
If the base case default or recovery rate for the portfolio is increased or decreased by a relative amount, the ratings of the notes may be affected as shown below.

Expected impact upon the note rating of increased defaults (class A/B):
Current ratings: 'AAAsf'/'A+sf'
Increase base case defaults by 10%: 'AA+sf'/'A+sf'
Increase base case defaults by 25%: 'AA+sf'/'Asf'
Increase base case defaults by 50%: 'AA-sf'/'BBB+sf'

Expected impact upon the note rating of reduced recoveries (class A/B):
Current ratings: 'AAAsf'/'A+sf'
Reduce base case recovery by 10%: 'AA+sf'/'A+sf'
Reduce base case recovery by 25%: 'AA+sf'/'Asf'
Reduce base case recovery by 50%: 'AAsf'/'A-sf'

Expected impact upon the note rating of increased defaults and reduced recoveries (class A/B):
Current ratings: 'AAAsf'/'A+sf'
Increase base case defaults by 10%; reduce base case recovery by 10%: 'AA+sf'/'Asf'
Increase base case defaults by 25%; reduce base case recovery by 25%: 'AAsf'/'BBB+sf'
Increase base case defaults by 50%; reduce base case recovery by 50%: 'Asf'/'BBB-sf'

TRANSACTION CHARACTERISTICS
The transaction is a securitisation of auto loan receivables predominantly originated to German retail obligors by VWB, a subsidiary of Volkswagen Financial Services AG, itself a subsidiary of Volkswagen AG (A/Stable/F1). The transaction characteristics are comparable to the existing securitisations under the Driver brand.

The class A and B notes pay floating interest based on one-month Euribor. Since the receivables pay fixed interest, the issuer entered into swap agreements to hedge the resulting interest rate mismatch.

The EUR750m transaction portfolio consists of 48,102 loan contracts granted to 47,661 borrowers. It is highly granular with the top 20 obligors accounting for 0.39% of the overall pool balance. The transaction is static and started amortising on the closing date. Repayment of note principal switches between sequential and a quasi-pro-rata allocation, based on transaction performance.

The transaction documents purport to place an obligation upon Fitch both to conduct monitored ratings on certain parties to the transaction which are not publicly rated by Fitch and to notify transaction parties of rating actions taken by Fitch on these parties. However, Fitch is not a transacting party and has undertaken no obligation either to conduct such monitored ratings or to notify any party of rating actions taken.