OREANDA-NEWS. Fitch Ratings has assigned VCL Multi-Compartment S.A.'s EUR724.5m class A and B notes to be issued under Compartment 21 the following expected ratings:

EUR704.2m floating-rate class A notes (ISIN: XS1191004701), due February 2021: 'AAA(EXP)sf'; Outlook Stable
EUR20.3m floating-rate class B notes (ISIN: XS1191005260), due February 2021: 'A+(EXP)sf'; Outlook Stable
EUR16.5m subordinated loan, due February 2021: not rated

The final ratings are contingent upon the receipt of final documents conforming to the information already received, a satisfactory review of final legal opinions to support the agency's analytical approach and the selection of swap counterparties.

The transaction is a securitisation of lease receivables originated by Volkswagen Leasing GmbH (VWL) within Germany, predominantly to micro, small and medium-sized commercial clients.

KEY RATING DRIVERS
The ratings are based on Fitch's assessment of VWL's origination and servicing procedures, Fitch's expectations of asset performance, the available credit enhancement (CE), and the transaction's legal structure.

Initial CE for the class A notes will be 7.1% and for the class B notes 4.4%. In analysing CE, Fitch only considered the floor amount of 1% of the pool balance at closing. The initial available over-collateralisation (OC) for the class A notes equals the purchase price discount for OC and the cash reserve (both 1.2%), the subordinated loan (2.2%) and the size of the class B notes (2.7%). For the class B notes, OC comprises the purchase price discount for OC and the cash reserve as well as the subordinated loan.

Fitch has derived its default and recovery assumptions from VWL's historical loss data and the performance reports of previous VCL transactions. As with other transactions from the same originator, no separate default and recovery information was provided. The observed losses have narrowed significantly since the start of the historical loss data series in 2002. In Fitch's view benign economic conditions in Germany have particularly affected the performance of recent vintages while improvements in origination/servicing have also contributed to the strong performance.

Fitch assumed 1.85% of defaults over the term of the transaction. This was stressed with a multiple of 6x in a 'AAAsf' scenario to account for the low absolute level and Fitch's through-the-cycle rating approach. The agency further assumed recoveries of 67.5% and applied a haircut of 45% in a 'AAAsf' scenario.

The transaction securitises regular monthly lease instalments only; residual values are not sold to the issuer. However, the issuer will benefit from realisation proceeds of vehicles backing the leases in case of lessee defaults or the materialisation of seller-related risks.

Fitch deems some structural transaction features to be weaker than in German peer transactions. Among these are the lack of clearly defined replacement procedures in case of a servicer default as well as provisions to ensure the issuer's payments should no monthly servicer report be available.

Fitch's outlook for the German economy is stable for 2015 and 2016. Corporate insolvencies, which are an important loss driver for this transaction, are at a historically low level. A significant increase in corporate insolvencies is not expected over the term of the transaction.

TRANSACTION CHARACTERISTICS
The transaction is a securitisation of auto lease receivables originated to German companies and individuals by VWL, a subsidiary of Volkswagen Financial Services AG, itself a subsidiary of Volkswagen Group (A/Stable/F1). The transaction
characteristics are comparable to the existing securitisations under the VCL brand.

The class A and B notes pay floating interest based on one-month Euribor. Since the receivables pay fixed interest, the issuer will enter into swap agreements at closing to hedge the resulting interest rate mismatch.

The EUR750m preliminary portfolio consists of 73,220 lease contracts granted to 48,383 lessees. It is highly granular with the top 20 lessees accounting for 0.68% of the initial outstanding pool balance. The transaction is static and will start amortising from closing. Repayment of note principal switches between sequential and pro-rata allocation, based on transaction performance.

RATING SENSITIVITIES
If the base case default or recovery rate for the portfolio is increased or decreased by a relative amount, the ratings of the notes may be affected as shown below.

Expected impact upon the note rating of increased defaults (class A/B):
Current ratings: 'AAAsf'/'A+sf'
Increase base case defaults by 10%: 'AA+sf'/'A+sf'
Increase base case defaults by 25%: 'AAsf'/'Asf'
Increase base case defaults by 50%: 'AA-sf'/'BBB+sf'

Expected impact upon the note rating of reduced recoveries (class A/B):
Current ratings: 'AAAsf'/'A+sf'
Reduce base case recovery by 10%: 'AA+sf'/'A+sf'
Reduce base case recovery by 25%: 'AA+sf'/'Asf'
Reduce base case recovery by 50%: 'AAsf'/'BBB+sf'

Expected impact upon the note rating of increased defaults and reduced recoveries (class A/B):
Current ratings: 'AAAsf'/'A+sf'
Increase base case defaults by 10%; reduce base case recovery by 10%: 'AA+sf'/'Asf'
Increase base case defaults by 25%; reduce base case recovery by 25%: 'AA-sf'/'BBB+sf'
Increase base case defaults by 50%; reduce base case recovery by 50%: 'A-sf'/'BB+sf'

Key Rating Drivers and Rating Sensitivities are further described in the accompanying Presale report available at www.fitchratings.com.
A comparison of the transaction's Representations, Warranties and Enforcement Mechanisms to those typical for this asset class is available by accessing the following reports: "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 26 March 2015 and "VCL Multi-Compartment S.A. - Compartment 21 - Presale Appendix".

DATA ADEQUACY
Fitch conducted a review of a small targeted sample of VWL's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Fitch also expects to receive a third party assessment conducted on the asset portfolio information prior to closing. Overall, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.