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15 Sep 2005
MOODY'S ASSIGNS DEFINITIVE RATINGS TO TWO CLASSES OF NOTES ISSUED BY DRIVER TWO GMBH
Approximately EUR 956 million of Debt Securities Affected
Frankfurt, September 15, 2005 -- Moody's Investors Service has assigned definitive long-term credit
ratings to the notes issued by Driver Two GmbH:
- Aaa to the EUR 917,500,000 Class A Floating Rate
Asset Backed Notes of 2005/2014;
- A1 to the EUR 38,500,000 Class B Floating Rate Asset
Backed Notes of 2005/2014;
Driver Two is the second securitisation of auto loan receivables from
VW Bank in Germany, and the second transaction certified by True
Sale International GmbH ("TSI") after Driver One GmbH, which closed
in November 2004. Driver Two GmbH is a limited liability company
established under German law and is wholly owned by three charitable foundations
established under German law.
Driver Two issues two classes of notes, the Class A Notes and the
Class B Notes, and is also granted a subordinated loan from an affiliate
of Volkswagen AG. The notes are backed by monthly loan receivables
from vehicle loan contracts originated by VW Bank. The loan contracts
have been entered into with commercial and private obligors to finance
the purchase of new and used vehicles. Loan contracts are either
amortising or balloon loans.
Credit enhancement to the notes is provided by the subordinated loan as
well as through overcollateralisation: Indeed, the net present
value of the initial portfolio using a discount rate of 3.665%
equals approximately EUR 1,000,000,000 whereas the sum
of the Class A Notes, the Class B Notes and the subordinated loan
only amounts to EUR 987,500,000 (98.75% of the
discounted principal balance).
Driver Two has a three-year revolving period subject to early amortisation
triggers. Receivables purchased during the revolving period are
purchased at a discount (the "additional overcollateralisation percentage")
of 3% to ensure that the credit enhancement is maintained at an
appropriate level over that time. A cash collateral account provides
liquidity throughout the life of the transaction and ultimately serves
as credit enhancement to the Class A Notes and the Class B Notes.
Driver Two enters into two interest rate swap agreements with BNP Paribas
(Aa2/P-1) in order to hedge its interest rate risk exposure due
to the mismatch of the fixed interest rate used to discount the loan receivables
and the floating interest payments due under the notes.
STRENGTHS AND WEAKNESSES
This transaction benefits, among others, from several positive
features: (1) Volkswagen Bank GmbH is the largest auto financing
company in Germany and has business experience since 1949. Volkswagen
Bank is rated (A2/P-1) and is regulated by the German Supervisory
Authority for Banking Business ("BAFin"); (2) Credit enhancement
is provided by (i) subordination, (ii) initial overcollateralisation
as well as the building up of additional overcollateralisation during
the revolving period, and (iii) a cash collateral account;
(3) New static net loss data has been internally corrected and externally
audited; (4) All loans are current at the cut-off date or
as the case may be as of the additional cut off dates; (5) The portfolio
is geographically well diversified across Germany with the largest single
obligor concentration of 0.02% and the top 20 obligors representing
0.20% of the portfolio.
Less favourable features and their mitigants are, inter alia:
(1) Moody's was not provided with static gross loss data nor with recovery
data; (2) Driver Two is the first revolving deal from Volkswagen
Bank in Germany. To mitigate the additional loss potential arising
from the replenishment, the credit enhancement for Class A during
the revolving period increases up to the target overcollateralisation
percentage for Class A through a purchase price discount mechanism for
the purchased portfolios during the revolving period. In addition,
early amortisation triggers based on the performance of the portfolio
(related to the cumulative loss rate and the delinquency rate) are put
in place; (3) The payment structure is not fully sequential but switches
to "quasi pro rata" after having reached the target overcollateralisation
percentages for Class A and Class B during the amortisation period.
The risk associated with the "quasi pro rata" amortisation has been tested
by using various back loaded timing of loss curves in the model;
(4) As VW Bank is also engaged in deposit affairs, a potential set
off risk might occur. However this set off risk is mitigated by
the following factors: (i) as of the cut off date of the initial
as well as of the additional portfolios, only borrowers without
deposits with VW Bank are eligible to be included in the portfolio,
(ii) based on the total VW Bank portfolio, only a limited number
of borrowers also maintain deposits with VW Bank, which limits the
risk of future deposits by the borrowers (iii) VW Bank is rated (A2/P-1)
and (iv) a set off reserve trigger has been incorporated, which
relates to the rating of VW Bank and the amount at risk; (5) In a
bankruptcy/moratorium scenario of VW Bank, payments out of VW Bank
might be stopped for a certain period of time and part of the collections
could be lost. In order to mitigate this risk, borrower notification
and payment redirection to the SPV account will take place upon certain
triggers being hit. This includes the case where the German Supervisory
Authority for Banking Business conducts measures against VW Bank because
of the risk of pending insolvency. The cash collateral account
also provides liquidity to overcome such a situation.
The definitive ratings address the expected loss posed to investors by
the legal final maturity of the notes. In Moody's opinion,
the structure allows for timely payment of interest and ultimate payment
of principal at par on or before the final legal maturity date.
To obtain a copy of Moody's New Issue Report, please see Moody's
website www.moodys.com or contact our Client Service Desk
in London (+44-20-7772 5454).
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
No Related Data.
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