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Rating Action:

MOODY'S ASSIGNS PROVISIONAL RATINGS TO 4 CLASSES OF NOTES TO BE ISSUED BY LEAGUE 2004-1 LIMITED

19 May 2004
MOODY'S ASSIGNS PROVISIONAL RATINGS TO 4 CLASSES OF NOTES TO BE ISSUED BY LEAGUE 2004-1 LIMITED

EUR 390 Million of Debt Securities Affected.

Frankfurt, May 19, 2004 -- Moody's has assigned the following provisional long-term ratings to the Notes to be issued by LEAGUE 2004-1 Ltd.:

- (P)Aaa to EUR [323,050,000] of Class A Notes due [2013];

- (P)Aa1 to EUR [28,750,000] of Class B Notes due [2013];

-(P)Aa3 to EUR [20,500,000] of Class C Notes due [2013];

-(P)Baa2 to EUR [17,700,000] of Class D Notes due [2013].

TRANSACTION STRUCTURE

VR-LEASING AG, VR MEDICO LEASING GmbH and BFL LEASING GmbH each sell and assign to DZ BANK a portfolio of lease receivables resulting from lease agreements with their commercial customers. In order to fund the purchase price, DZ BANK enters into a trust agreement with the issuer pursuant to which the issuer will issue four classes of notes, each containing FRN and fixed rate notes, and will transfer the issuance proceeds to DZ BANK. DZ BANK is obliged to reimburse and indemnify the issuer against any and all costs and liabilities resulting from the issuance of the notes, including, but not limited to, all amounts necessary to pay interest and principal to the note holders to the extent due and payable on the relevant payment days. As security for its obligations vis-a-vis the issuer, DZ BANK pledges the lease receivables and assigns and/or transfers certain related collateral, which consists primarily of the leased objects, to the issuer.

The intention of this security arrangement is that, even if DZ BANK becomes insolvent, the issuer can collect the lease receivables when due, without the involvement of the insolvency administrator of DZ BANK and use the proceeds resulting from such enforcement to make payments to the noteholders in accordance with the priority of payments.

To fulfill its obligation vis-a-vis the transaction creditors, the issuer enters into a security trust agreement with League GmbH, the security trustee, pursuant to which the security trustee will perform duties of the issuer for the benefit and the interests of the transaction creditors. As security for its obligations vis-a-vis the security trustee, the issuer transfers its assets to the security trustee. The intention of this security arrangement is to ensure that the assets granted as security to the issuer will be realised and the proceeds resulting from such realisation will be used by the security trustee also for the ultimate benefit and the interests of the transaction creditors.

The issuer will also authorise the security trustee to collect the lease receivables directly from the lessees when due. Together with the notification on the assignment of the receivables, DZ BANK will procure that the lessees authorise the security trustee to collect all incoming lease payments from the lessees through direct debit of the relevant lessee's bank accounts. The servicing and administration of the lease agreements will be continued by the originators.

STRENGTHS AND WEAKNESSES

This transaction benefits, among others, from several positive features: (1) Credit enhancement is provided through (i) subordination, (ii) a flexible cash reserve, (iii) excess spread and (iv) a purchase discount; (2) Moody's has received historical static net and gross loss data for the three originators separately as well as on a leasing object basis separately. The quarterly cohort analysis was provided for the period between Q1 1996 up to Q2 2003; (3) No commingling risk, as the lessees pay the lease payments directly to League GmbH, acting as the security trustee; (4) Exclusion of the market risk with respect to the residual value component of the leases; (5) Initially 100% of the lessees pay via direct debit; (6) The existence of a back-up servicer, which allows Moody's, after the receipt of a copy of a letter of intend from Deutsche Leasing AG & Co. KG, to rely on VR-Leasing's historical recovery experience as a proxy for its modelling assumptions and (7) A full reserve fund provisioning for delinquent and defaulted receivables.

Less favourable features and their mitigants are, inter alia: (1) The structure involves a revolving period of three years with quarterly replenishments, which might change the composition of the initial portfolio. However, this risk is mitigated by eligibility criteria and concentration limits, in particular the leasing object cluster concentration limits as well as the early amortisation triggers; (2) The three servicers are not rated by Moody's. This is somewhat mitigated as VR - LEASING belongs to DZ Bank group (A2/P-1) and is one of Germany's largest manufacturer independent leasing companies. Furthermore, the transaction has no cash exposure to the servicers due to lessees paying directly to the trustee. The administrative servicing risk is mitigated by the intended back-up solution -- Moody's has been informed that Deutsche Leasing AG & Co. KG intents to serve as back-up servicer, the respective back-up servicing agreement reflecting the agreed upon conditions and procedures (which were presented to Moody's) will be drafted before closing; (3) As the lessees are commercial entities, single lessee concentration can be relatively high- the largest lessee may account for 0.50% of the portfolio and (4) The historical data shows on the one hand relatively high gross default rates but on the other hand also relatively high recovery rates, which were accounted for in modelling because of the strong back-up solution.

The provisional ratings address the expected loss posed to investors until legal final maturity. Moody's issues provisional ratings in advance of the final sale of securities, but these ratings represent only Moody's preliminary credit opinions. Upon a conclusive review of the transaction and associated documentation, Moody's will endeavour to assign definitive ratings to the Notes. A definitive rating may differ from a provisional rating.

To obtain a copy of Moody's Pre-Sale report, please see Moody's website www.moodys.com or contact our Client Service Desk in London (+44-20-7772 5454).

Paris
Annick Poulain
Managing Director
Structured Finance Group
Moody's France S.A.
JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454

Frankfurt
Jens Lindner
Vice President - Senior Analyst
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454

No Related Data.
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