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I AGREE
24 Feb 2011
Euro 714.4 million ABS Notes rated, relating to a portfolio of German auto loans
Frankfurt am Main, February 24, 2011 -- Moody's Investors Service has assigned the following definitive ratings
to notes issued by Driver Eight GmbH:
- Aaa (sf) to the EUR 690 million Class A Floating Rate Asset Backed
Notes due February 2017
- A1 (sf) to the EUR 24.4 million Class B Floating Rate
Asset Backed Notes due February 2017
RATINGS RATIONALE
The transaction is a static cash securitisation of auto loans extended
to obligors in Germany by Volkswagen Bank GmbH (A2/P-1) ultimately
owned by of Volkswagen AG rated A3/P-2. This public securitisation
continues the series of Driver transactions sponsored by Volkswagen Bank
GmbH. The previously Moody's rated Driver transactions are generally
performing in line with or better than expectations. Class B notes
of three previous Driver transactions rated by Moody's were upgraded on
5 November 2010 (see press release "Moody's upgrades German auto ABS notes
issued by Driver Four, Driver Three and Driver Two, originated
by Volkswagen Bank", 5 November 2010).
The portfolio of underlying assets consists of auto loans distributed
through VW Group auto dealers. These loans finance new cars (65.9%)
and used cars (34.1%) to private and commercial customers.
As at January 2011 the final portfolio consists of 60,299 non-delinquent
contracts with a weighted average seasoning of 13 month and outstanding
balance of approx. EUR 750 million.
According to Moody's, the transaction benefits from credit strengths
such as the granularity of the portfolio, financial strength and
securitisation experience of the originator, and good performance
of past transactions. However, Moody's notes that the transaction
features some credit weaknesses such as 82.2% balloon loans
in the total portfolio, commingling risk and a high degree of linkage
to Volkswagen Bank GmbH. Various mitigants have been put in place
in the transaction structure, such as performance related triggers
to switch to sequential amortisation and rating triggers to provide additional
reserves. Commingling risk is mitigated by (i) the automatic termination
of collection rights in case of a servicer insolvency, and (ii)
a rating trigger to change the cash flow sweep mechanism and to provide
cash collateral.
Moody's analysis focused, amongst other factors, on (i) an
evaluation of the underlying portfolio of loans; (ii) historical
performance information of the total book and past ABS transactions;
(iii) the credit enhancement provided by subordination and reserve fund;
(iv) the liquidity support available in the transaction by way of principal
to pay interest and the reserve fund.
Moody's assumed a mean loss rate of 1.7% for the securitised
pool. A coefficient of variation of 45.0% is used
as the other main input for Moody's cash flow model ABSCORE.
The V Score analysis for the transaction is Low/Medium which is in line
with the German Auto Loan sector. Only the analytical complexity
is considered medium as the repayment mechanisms of the transaction lead
to higher complexity on modeling the priority of payments. V Scores
are a relative assessment of the quality of available credit information
and of the degree of dependence on various assumptions used in determining
the rating. For more information, the V Score has been assigned
accordingly to the report "V Scores and Parameter Sensitivities in the
Non-U.S. Vehicles ABS Sector", published in
January 2009.
The principal methodologies used in this rating were Moody's Approach
to Rating European Auto ABS: More Rubber Set to Hit European Roads,
published in November 2002 and The Lognormal Method Applied to ABS Analysis,
published in July 2000.
Moody's Investors Service did not receive or take into account a third
party due diligence report on the underlying assets or financial instruments
in this transaction.
The 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
with respect to the Class A notes and Class B notes by legal final maturity.
Moody's ratings address only the credit risks associated with the transaction.
Other non-credit risks have not been addressed but may have a significant
effect on yield to investors.
Moody's used its cash-flow model Moody's ABSCORE as part of its
quantitative analysis of the transaction. Moody's ABSCORE model
enables users to model various features of a standard European ABS transaction
-- including the specifics of the default distribution of
the assets, their portfolio amortisation profile, yield as
well as the specific priority of payments, swaps and reserve funds
on the liability side of the ABS structure.
In rating auto loan ABS, default rate and default volatility measured
as coefficient of variation (CoV) are two key inputs that determine the
transaction cash flows in the cash flow model. Parameter sensitivities
for this transaction have been tested in the following manner: Moody's
tested nine scenarios derived from a combination of mean loss: 1.7%
(base case), 1.95% (base case + 0.25%),
2.2% (base case + 0.5%) and CoV:
45% (base case), 50% (base case + 5%),
55% (base case + 10%). The results for Class
A under these scenarios vary from Aaa (base case) model output to A1 model
output where the mean loss is 2.2% and CoV is 55%.
Parameter sensitivities provide a quantitative/model indicated calculation
of the number of notches that a Moody's rated structured finance security
may vary if certain input parameters used in the initial rating process
differed. The analysis assumes that the deal has not aged.
It is not intended to measure how the rating of the security might migrate
over time, but rather how the initial model output Class A might
have differed if the two parameters within a given sector that have the
greatest impact were varied.
Provisional ratings were assigned on 17 January 2011.
REGULATORY DISCLOSURES
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
and public information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
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Please see the ratings disclosure page on our website www.moodys.com
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Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Frankfurt am Main
Armin Krapf
Asst Vice President - Analyst
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Milan
Alex Cataldo
Senior Vice President
Structured Finance Group
Moody's Italia S.r.l
Telephone:+39-02-9148-1100
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns definitive ratings to ABS issued by Driver Eight GmbH
No Related Data.
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