DBRS Confirms and Assigns New Ratings to Class A and Class B Notes Issued by Driver UK Master S.A. acting with respect to its Compartment 2

DBRS Ratings Limited (DBRS) has taken rating actions on the Class A and Class B Notes issued by Driver UK Master S.A. acting with respect to its Compartment 2 (Driver UK Master or the Issuer). The rating actions reflect:

(1) Confirmation of the various Series of Notes issued in 2013 that, collectively, have been subject to an amendment agreement that primarily extends the structure’s revolving period by twelve months;
(2) New ratings applied to further Series of Notes issued as of today’s date; and
(3) Certain Series of Notes that have been discontinued-repaid under the existing the Driver UK Master S.A. programme.

DBRS has today confirmed the AAA (sf) ratings assigned to the Class A Series 2013-1, Class A Series 2013-2, Class A Series 2013-3, Class A Series 2013-4, Class A Series 2013-5, Class A Series 2013-6, Class A Series 2013-7, Class A Series 2013-8 and Class A Series 2013-10 Notes previously issued by Driver UK Master.

DBRS has also confirmed the A (high) (sf) ratings assigned to the Class B Series 2013-1, Class B Series 2013-2, Class B Series 2013-3, Class B Series 2013-4 previously issued by Driver UK Master.

DBRS has also assigned new AAA (sf) ratings to the Class A Series 2014-1, Class A Series 2014-2 and Class A Series 2014-3 Notes and A (high) (sf) ratings to the Class B Series 2014-1 and Class B Series 2014-2 Notes issued by Driver UK Master.

Furthermore, DBRS has discontinued the AAA (sf) rating assigned to the Class A Series 2013-9 and the A (high) (sf) rating previously assigned to the Class B Series 2013-5 Notes due to full repayment.

The securitised portfolio consists of a pool of automobile purchase contracts originated by Volkswagen Financial Services (UK) Limited (VWFS (UK)) to predominantly retail customers secured by new and used vehicles. Upon closing, the pool has a weighted-average original term of approximately 43 months with auto loans representing new vehicles accounting for 73% of the receivables. Over 99% of the receivables relate to the financing of Volkswagen Group vehicles.

The ratings are based upon review by DBRS of the following analytical considerations:

• Transaction capital structure, proposed ratings and form and sufficiency of available credit enhancement.
• Class A Credit enhancement is in the form of overcollateralisation, subordination of the Class B Notes, a Subordinated Loan and a Cash Collateral Account. Credit enhancement levels are sufficient to support the DBRS projected expected cumulative net loss assumption under various stress scenarios at a AAA (sf) standard for the Class A Notes and an A (high) (sf) standard for the Class B Notes issued by Driver UK Master.
• The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the rating addresses the payment of timely interest on a monthly basis and principal by the legal final maturity date.
• The transaction parties’ capabilities with regard to originations, underwriting, servicing and the financial strength of VWFS (UK).
• The credit quality and industry diversification of the collateral and historical and projected performance of the VWFS (UK) auto loan receivables portfolio.
• The transaction’s consistency of the legal structure with the DBRS “Legal Criteria for European Structured Finance Transaction” methodology and the presence of legal opinions that address the true sale of the assets to the Issuer and non-consolidation of the special-purpose vehicle with the seller.

The transaction’s documentation does not contemplate DBRS’s ratings unless they are publicly available, but does include those of Fitch and Standard and Poor’s if publically available. As of today, Mitsubishi UFJ Securities International PLC is not publicly rated by DBRS or Fitch. As a result, DBRS monitors the publically available rating of A+ from Standard and Poor’s for the purpose of assessing the suitability of Mitsubishi UFJ Securities International PLC as one of the swap counterparties.

Notes:
All figures are in GBP unless otherwise noted.

The principal methodology applicable is Rating European Consumer and Commercial Asset-Backed Securitisations, which can be found on www.dbrs.com at http://www.dbrs.com/about/methodologies. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” at http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include performance data relating to the receivables provided by VWFS (UK) via the Co-Arrangers, Volkswagen Financial Services AG and HSBC Bank plc. DBRS received historical performance data relating to VWFS (UK) originations by monthly vintage on a cumulative net loss and default basis going back to July 2002. Data was also provided relating to delinquencies, vehicle return realisation rates and portfolio stratification tables that allowed DBRS to further assess the portfolio. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

This is the first DBRS rating on the Class A Series 2014-1, Class A Series 2014-2, Class A Series 2014-3, Class B Series 2014-1, Class B Series 2014-2 Notes and these are newly created financial instruments.

This is the first rating action since the assignment of the ratings on all previously existing Class A and Class B Series of Notes on 23 October 2013.

The full report providing additional analytical detail is available by clicking on the link or by contacting us at info@dbrs.com.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of the changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the base case):

• Probability of default (PD) rate used: base-case PD of 6.95%, a 25% and 50% increase on the base-case PD.
• Recovery rate used: base-case recovery rate of 72.5% (a loss given default (LGD) of 27.5%).
• Residual value loss: For Class A, a base case of 48% and for Class B, a base case of 35%. In both instances a 25% and 50% increase in residual value loss.

DBRS concludes that for the Class A Notes:

• A hypothetical increase of the base-case PD and LGD by 25%, ceteris paribus, would not lead to a downgrade of the Class A Notes rating.
• A hypothetical increase of the base-case Residual Value Loss by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to an AA (high) (sf) rating.
• A hypothetical increase of the base-case PD and LGD by 50%, or a hypothetical increase of the base-case residual value loss by 50% would lead to a downgrade of the Class A Notes to an AA (sf) rating.
• A hypothetical increase of the base-case PD and LGD by 25% and a hypothetical increase of the residual value loss by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to an AA (sf) rating.
• A hypothetical increase of the base-case PD and LGD by 25% and a hypothetical increase of the residual value loss by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to an AA (sf) rating.
• A hypothetical increase of the base-case PD and LGD by 50% and a hypothetical increase of the residual value loss by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to an AA (low) (sf) rating.
• A hypothetical increase of the base-case PD and LGD by 50% and a hypothetical increase of the residual value loss by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to an AA (low) (sf) rating.

DBRS concludes that for the Class B Notes:

• A hypothetical increase of the base-case PD and LGD by 25% or a hypothetical increase of the base-case residual value loss by 25%, would lead to a downgrade of the Class B Notes to an A (sf) rating.
• A hypothetical increase of the base-case PD and LGD by 50% or a hypothetical increase of the base-case residual value loss by 50%, would lead to a downgrade of the Class B Notes to an A (low) (sf) rating.
• A hypothetical increase of the base-case PD and LGD by 25% and a hypothetical increase of the residual value loss by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to an A (low) (sf) rating.
• A hypothetical increase of the base-case PD and LGD by 50% and a hypothetical increase of the residual value loss by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to an A (low) (sf) rating.
• A hypothetical increase of the base-case PD and LGD by 25% and a hypothetical increase of the residual value loss by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to an A (low) (sf) rating.
• A hypothetical increase of the base-case PD and LGD by 50% and a hypothetical increase of the residual value loss by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to a BBB (high) (sf) rating.

For further information on DBRS historic default rates published by the European Securities and Markets Administration in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: Alexander Garrod
Initial Rating Date: 23 October 2013
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Vito Natale
Rating Committee Chair: Chuck Weilamann

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The rating methodologies and criteria used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.

• Rating European Consumer and Commercial Asset-Backed Securitisations.
• Legal Criteria for European Structured Finance Transactions.
• Derivative Criteria for European Structured Finance Transactions.
• Operational Risk Assessment for European Structured Finance Servicers.
• Unified Interest Rate Model Methodology for European Securitisations.