DBRS Morningstar Ratings GmbH (DBRS Morningstar) confirmed the ratings on the bonds issued by Driver Multi-Compartment S.A., acting for and on behalf of its Compartment fourteen (the Issuer) as follows:
-- Class A Notes at AAA (sf)
-- Class B Notes at AA (sf)
The ratings on the Class A and Class B Notes address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.
The confirmations 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 January 2020 payment date.
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the rated notes to cover the expected losses at their respective rating levels.
The Issuer is a securitisation of German auto loan receivables originated and serviced by Volkswagen Bank GmbH (VW Bank). The transaction closed in March 2018.
As of January 2020, loans with two to three months in arrears represented 0.2% of the outstanding portfolio balance, slightly up from 0.1% in January 2019. The 90+ delinquency ratio was 0.2%, slightly up from 0.1% in the same period. As of January 2020, the cumulative default ratio was 0.8% and the cumulative loss ratio increased to 0.1%.
PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and has maintained its base case PD and LGD assumptions at 2.1% and 40.0%, respectively.
As of the January 2020 payment date, credit enhancement to the Class A Notes was 10.3%, down from 11.0% one year ago. Credit enhancement to the Class B Notes was 5.7%, down from 7.3% in the same period. Credit enhancement is provided by subordination of junior classes and overcollateralisation. The slight decrease of the credit enhancements for Class A and Class B Notes is due to the decreased level of overcollateralisation and amortisation of the subordinated loan.
The transaction benefits from a nonamortising Reserve Fund of EUR 9.0 million, available to cover senior fees and interest on the Class A Notes and Class B Notes.
The Bank of New York Mellon, Frankfurt Branch acts as the Account Bank for the transaction. Based on the reference private rating of the Account Bank, 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 Class A Notes, as described in DBRS Morningstar 's "Legal Criteria for European Structured Finance Transactions" methodology.
Crédit Agricole Corporate & Investment Bank acts as the Swap Counterparty for the transaction. DBRS Morningstar’s private Long-Term Critical Obligations Rating of Crédit Agricole Corporate & Investment Bank is consistent with the First Rating Threshold as described in DBRS Morningstar’s “Derivative Criteria for European Structured Finance Transactions” methodology.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.
DBRS Morningstar analysed the transaction structure in Intex DealMaker.
For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.
For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the ratings is the Master European Structured Finance Surveillance Methodology (December 2019). 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.
Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: http://www.dbrsmorningstar.com/about/methodologies.
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 Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/350410/global-methodology-for-rating-sovereign-governments
The sources of data and information used for these ratings include investor reports provided by VW Bank 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 rating, DBRS Morningstar was not 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 26 March 2019, when DBRS Morningstar confirmed the rating of Class A Notes at AAA (sf) and upgraded the rating of the Class B Notes to AA (sf) from A (high) (sf).
The lead analyst responsibilities for this transaction have been transferred to Shalva Beshia.
Information regarding DBRS Morningstar ratings, including definitions, policies and methodologies is available at www.dbrs.com.
To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the rating (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 2.1% 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 of the Class A Notes would be expected to fall to AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to fall to AA (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to fall to AA (low) (sf).
Class A 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)
Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of AA (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating A (sf)
For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:
Ratings assigned by DBRS Ratings GmbH are subject to EU and US regulations only.
Lead Analyst: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 6 February 2018
DBRS Ratings GmbH
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60311 Frankfurt am Main Germany
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: http://www.dbrsmorningstar.com/about/methodologies.
-- Master European Structured Finance Surveillance Methodology (13 December 2019).
-- Legal Criteria for European Structured Finance Transactions (11 September 2019).
-- Operational Risk Assessment for European Structured Finance Servicers (28 February 2020).
-- Rating European Consumer and Commercial Asset-Backed Securitisations (13 January 2020).
-- Rating European Structured Finance Transactions Methodology (28 February 2020).
-- Interest Rate Stresses for European Structured Finance Transactions (10 October 2019)
-- Derivative Criteria for European Structured Finance Transactions (26 September 2019)
A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrsmorningstar.com/research/278375.
For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at firstname.lastname@example.org.