Class B Asset Backed Floating Rate Notes of 2018/2024
VCL Multi-Compartment S.A., Compartment VCL 27
Action Validity Date
Creditreform Rating (CRA) has confirmed the rating of the Class A Notes and upgraded the rating of the Class B Notes of VCL Multi-Compartment S.A., acting for and on behalf of its Compartments 27 (VCL 27) as follows:
EUR Floating Rate Asset Backed Class A notes with a current rating of AAAsf / stable (current outstanding amount: EUR 518,059,800.00)
EUR Floating Rate Asset Backed Class B notes with a current rating of AAsf (from AA-sf) / stable (current outstanding amount: EUR 18,200,000.00)
The transaction is a securitisation of German auto lease receivables, originated by Volkswagen Leasing GmbH (VWL).
Closing of VCL 27 took place in November 2018. As of November 2019 the outstanding discounted balance amounts to EUR 575m with a share of 0.51% of the outstanding discounted balance being delinquent two months or more. The cumulative net loss ratio is 0.04% of the initial discounted receivables balance. Currently, the Class A and B Notes represent 90.03% and 3.16% of the outstanding discounted receivables balance, respectively. Credit enhancement to the notes is provided by a Subordinated Loan (4.87%), overcollateralization (1.94%), and a cash reserve amounting to 1.94% of the outstanding discounted receivables balance. Since the closing the credit enhancement level of the Class A Notes increased from 7.20% to 11.64%, while the credit enhancement level of the Class B Notes increased from 5.30% to 8.47%.
The rating actions have taken into account the increased credit enhancement levels for the Class A and B Notes and the overall portfolio performance as of the end of October 2019, including a low level of the cumulative net loss ratio.
Creditreform Rating (CRA) has assigned ratings to the Class A and Class B Notes of VCL Multi-Compartment S.A., acting for and on behalf of its Compartment 27 (VCL 27), as follows:
EUR Floating Rate Asset Backed Class A notes with a current rating of AAAsf / stable (current outstanding amount: EUR 900,000,000)
EUR Floating Rate Asset Backed Class B notes with a current rating of AA-sf / stable (current outstanding amount: EUR 18,200,000.00)
The transaction is a securitisation of German auto lease receivables, originated by Volkswagen Leasing GmbH (VWL). To size the credit risk of the portfolio and derive base case assumptions about loss rates and expected recovery performance, Creditreform Rating used data provided by VWL as well as internal data bases. VCL 27 is a static pool and securitises only the finance portion of the leases; residual values are not securitized by the Issuer. A combination of subordinated loan, overcollateralization and a cash reserve will provide credit enhancement to the rated Class A Notes (7.20%) and Class B Notes (5.30%).
VWL will credit to the Cash Collateral Account certain amounts which will be available to mitigate commingling risks, trade tax and VAT tax risks, and cover the Issuer´s exposure to VWL. To mitigate commingling risk, the structure obliges the Servicer to advance the aggregate value of all lease payments due in the next monthly period if minimum ratings of VWFS are no longer satisfied.
Downgrade collateral and replacement provisions mitigate counterparty risk exposures with respect to the Swap counterparty and Account Bank. Risks related to the Issuer are limited, the compartment structure being ring-fenced and with limited recourse to other creditors of the Issuer.
In order to assess the portfolio´s credit risk and to estimate base case assumptions regarding loss rates and expected recovery performance, Creditreform Rating used data provided by VWL as well as internal data-bases. Following the analysis of historical data, CRA set the base case gross loss rate at 1.62% and the base case recovery rate at 65%. Furthermore, the CRA Portfolio and Benchmark Analysis showed a slightly higher level of credit risk as the base case assumption. CRA considers the default multiples and recovery haircuts to be sufficient to capture the credit and portfolio risk to this transaction.
CRA selects default multiples at x5.62 (AAAsf) and x4.29 (AA-sf). Moreover, CRA set recovery haircuts at 45.34% (AAAsf) and 37.88% (AA-sf), taking into account transaction-specific features such as observed volatility and established recovery procedures, as well as potential market value risks. This resulted in total expected net losses of 5.85% (AAAsf) and 4.14% (AA-sf). These scenario-specific assumptions were tested in CRA´s proprietary cash flow model, which was tailored to reflect the structure of VCL 27 and to assess the issuer´s ability to service its debt in a full and timely manner.