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Rating Action:

Moody's assigns provisional ratings to ABS to be issued by VCL 13

21 Mar 2011

Euro 714.7 million ABS Notes rated, relating to a portfolio of German auto lease receivables

Frankfurt am Main, March 21, 2011 -- Moody's Investors Service has assigned the following provisional ratings to notes to be issued by VCL Multi-Compartment S.A., Compartment VCL 13:

- (P)Aaa (sf) to the EUR 690 million Class A Floating Rate Asset Backed Notes due November 2016

- (P)A1 (sf) to the EUR 24.7 million Class B Floating Rate Asset Backed Notes due November 2016

RATINGS RATIONALE

The transaction is a static cash securitisation of auto lease receivables extended to obligors in Germany by Volkswagen Leasing GmbH (A3) ultimately owned by of Volkswagen AG rated A3/P-2. This public securitisation continues the series of VCL transactions sponsored by Volkswagen Leasing GmbH. The previously Moody's rated VCL transactions are generally performing in line with or better than initial expectations. Indeed, Class B notes of VCL No. 9 S.A. rated by Moody's were upgraded on 10 June 2009 (see press release "Moody's upgrades notes issued by VCL No. 9 S.A.", 10 June 2009).

The portfolio of underlying assets consists of auto lease instalment receivables. Underlying lease contracts are distributed through VW Group auto dealers. These lease contracts finance new cars (93.7%) and used cars (6.3%) to mainly commercial customers. As at January 2011, the provisional portfolio consists of 64,746 non-delinquent contracts with a weighted average seasoning of 6 months 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 commingling risk and a high degree of linkage to Volkswagen Leasing 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.

True sale risk may materialise in the securitisation of German lease receivables in case of an originator insolvency due to non-compliance with criteria of Sec. 108 German insolvency code. This is mitigated in line with the majority view among law firms with portfolio eligibility criteria that reflect the criteria of Sec. 108 German insolvency code. Potential lessee set-off and contract termination risks related to service components in lease contracts are mitigated by the strong incentive to continue services also in a servicer insolvency due to a post German insolvency restructuring scenario. In addition, enforcement of such lessee rights is uncertain.

Moody's analysis focused, amongst other factors, on (i) an evaluation of the underlying portfolio of leases; (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 1.5% 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 Lease 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 lease ABS, loss rate and loss 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: 1.5% (base case), 1.75% (base case + 0.25%), 2.0% (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 2.0% 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.

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 and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

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 provisional ratings to ABS to be issued by VCL 13
No Related Data.
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