OREANDA-NEWS. Fitch Ratings has upgraded VCL Multi-Compartment S.A. - Compartment 19's (VCL 19) class B notes and affirmed the class A notes as follows:

EUR412.4m class A notes (ISIN: XS1022746959), due November 2019: affirmed at 'AAAsf'; Outlook Stable
EUR22.5m class B notes (ISIN: XS1022763533), due November 2019: upgraded to 'AA+sf' from 'AA-sf'; Outlook Stable

VCL 19 is a static true-sale securitisation of leases granted to German clients. The originator, VW Leasing GmbH is a subsidiary of VW Financial Services AG, itself a subsidiary of Volkswagen Group (A/Stable/F1).

KEY RATING DRIVERS
The upgrade of the class B notes reflects an increase in credit enhancement (CE) as a result of rapid portfolio amortisation and the portfolio's solid performance since issue in February 2014.

In Fitch's view, the stable asset outlook for the German consumer ABS sector does not suggest a significant increase in defaults. Furthermore, the transaction has been reporting low 30 days+ delinquencies of currently 1.3%, often an indicator of future defaults.

As of the January 2015 reporting date, the portfolio had amortised down to EUR465.1m from the original amount of EUR750m in February 2014. The portfolio's composition has remained largely unchanged since closing.

Since closing, CE has risen to 12.9% from 8.0% for the class A notes and 8.1% from 5.0% for the class B notes. Currently, the pool amortisation is applied to redeem the notes in sequential order. After the target overcollateralisation levels are reached, the proceeds from pool amortisation will be applied to redeem the class A and B notes on a pro rata basis.

Reported defaults (0.6% of initial pool balance) have been in line with our expectations. Therefore, Fitch maintained its original default assumption of 1.85%.

RATING SENSITIVITIES
The portfolio's performance would be sensitive to a sharp increase in corporate insolvencies causing significantly higher default rates. However, the transaction has built up CE through deleveraging, which would reduce downward pressure on the rated notes following an unlikely sharp increase in insolvencies and thus defaults.

The ratings would also be sensitive to significantly lower than expected recoveries from defaulted loans, due to, for example, a severe downturn of the German used car market.

Unremedied counterparty risk, for example, in the case of unhedged interest rate risk following the swap counterparty's default or lost funds following a default of the account bank, could also create downward pressure on the ratings.

Expected impact upon the note rating of increased defaults and reduced recoveries:
Class A: Current Rating: 'AAAsf'
Increase base case defaults by 25%: 'AAAsf'; reduce base case recoveries by 25%: 'AAAsf'

Class B: Current Rating: 'AA+sf'
Increase base case defaults by 25%: 'AA-sf'; reduce base case recoveries by 25%: 'AA-sf'

Initial Key Rating Drivers and Rating Sensitivities are further described in the New Issue Report published on 25 February 2014.