DBRS Confirms and Upgrades Ratings on Driver France FCT, acting exclusively through the Compartment Driver France Two

DBRS Ratings Limited (DBRS) has today confirmed the rating of AAA (sf) on the Class A Notes and upgraded the rating on the Class B Notes to AA (sf) from A (high) (sf) issued by Driver France FCT acting exclusively through the Compartment Driver France Two (the Issuer).

The rating actions on the Class A and Class B Notes follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies and defaults, as of April 2017.
-- Updated default, recovery and loss assumptions on the remaining receivables.
-- Current available credit enhancement to the Class A and Class B notes to cover the expected losses at the AAA (sf) and AA (sf) rating levels, respectively.

The Issuer is a securitisation of French auto loans originated and serviced by the French branch of Volkswagen Bank GmbH.

PORTFOLIO PERFORMANCE
As of April 2017, two- to three-month arrears were at 0.19% and the 90+ delinquency ratio was at 0.30%. Current cumulative defaults are low at 0.38% and the current cumulative net loss ratio is zero.

PORTFOLIO ASSUMPTIONS
DBRS has conducted an analysis of the updated vintage data provided by Volkswagen Bank GmbH. As a result, DBRS has reduced its net loss assumption on the remaining collateral pool to 1.17% from 1.34%.

CREDIT ENHANCEMENT
The transaction has a sequential/pro rata amortisation structure whereby all principal payments from the receivables pay down the Class A Notes until Class A overcollateralisation (OC) reaches its target level of 11.00%. As of the April 2017 payment date, Class A OC is at its target level of 11.00% and Class B OC is at its target level of 7.00%.

The transaction benefits from a Cash Collateral Account, currently at the target level of EUR 5.00 million. The Cash Collateral Account covers senior fees as well as Class A and Class B interest and principal losses on the final payment date.

BNP Paribas SA (BNP Paribas) is the account bank for the transaction. The account bank reference rating of AA, which is one notch below the DBRS public Long-Term Critical Obligations Rating of AA (high) on BNP Paribas, complies with the Minimum Institution Rating, given the rating assigned to the Class A Notes as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

DZ Bank AG Deutsche Zentral-Genossenschaftsbank (DZ Bank) is the swap counterparty for the transaction. The DBRS public rating of DZ Bank at A (high) is above the First Rating Threshold as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is the Master European Structured Finance Surveillance Methodology.

DBRS 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 on www.dbrs.com at http://www.dbrs.com/about/methodologies

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

The sources of data and information used for this rating include monthly investor reports provided by Volkswagen Financial Services AG.

DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purpose of providing this rating to be of satisfactory quality.

DBRS 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 24 May 2016 when DBRS confirmed the rating on the Class A at AAA (sf) and the rating on the Class B Notes at A (high) (sf).

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

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (the Base Case):
-- DBRS expected a lifetime base case probability of default (PD) and loss given default (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 2.21% and 53.04%, 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 remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to remain at AAA (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 remain at AAA (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (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 (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 of A (high) (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 A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)

For further information on DBRS historic default rates published by the European Securities and Markets Authority (“ESMA”) 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.

Lead Analyst: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 27 May 2015

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960

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

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

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at http://www.dbrs.com/research/278375.