OREANDA-NEWS. Fitch Ratings has affirmed 14 ABS transactions, upgraded one class of one transaction and revised the Outlook on six tranches of five transactions. A full list of rating actions and affected tranches is available at www.fitchratings.com or by clicking the link above.

Fitch has reviewed 15 European ABS transactions where Volkswagen Group (VW; BBB+/Negative/F2/) is the originator. This followed emissions allegations that became public when the US Environmental Protection Agency issued a notification of violation of the Clean Air Act to VW on 18 September 2015 (see Fitch: Crisis May Hit VW Auto ABS Through Used Car Prices). A special report on the analytical approach Fitch followed for this review is available at www.fitchratings.com.

KEY RATING DRIVERS
Scandal May Affect Prices
The current scandal involving the rigging of exhaust gas emissions software by the VW will, at least temporarily, impact the used car prices for affected vehicles. Fitch has therefore reduced its base case recovery expectations for these vehicles by 10% in VW-originated ABS. It has also reduced its assumptions on residual value (RV) sale proceeds and adjusted voluntary termination (VT) losses accordingly.

Customers' Legal Rights Differ
The legal position of customers that have purchased vehicles caught in the scandal varies by jurisdiction. According to transaction counsel, customers in Germany and France have rights against the dealer who sold the vehicle in the first place, while customers in the UK buying a car with a personal contract or a hire purchase agreement have direct claims against the loan originator.

Technical Fix Determines Risk
Fitch understands from transaction counsel that failure to fully repair the affected cars could result in a legally permissible reduction in lease or loan instalments for German and French customers. UK customer rights and claims depend on the statements made about the vehicle by the manufacturer, dealer and originator. UK legislation already offers customers wide-ranging termination rights, in addition to termination rights resulting from the emissions scandal.

Limited Impact on ABS
The rating impact of the scandal on European ABS depends on factors including: the share of affected cars in the pool; direct or indirect car price risk; and any increase in credit enhancement since closing. Based on the quantitative and legal analysis conducted, Fitch believes that no transaction ratings are currently impacted by the scandal, but we have revised the Outlooks to Negative from Stable on four tranches. We note that some uncertainty remains as new information emerge, and continue monitoring the transactions.

Buffer for Prices and Shares
Fitch has tested rating sensitivities using greater price declines and including higher shares of affected vehicles. Most transactions can withstand more stress than is currently expected to derive from the emissions scandal before the ratings would be affected.

Volkswagen Related Risks Limited
Fitch considers the provisions in transaction documents addressing servicer and seller-related risks like comingling and set-off appropriate. Servicer continuity risk is reduced by the comfortable liquidity position in all transactions.

However, fixing the vehicles' problems is necessary to protect transactions from extensive customer claims, thereby increasing dependency on VW. In addition, credit exposure to the sellers and ultimately VW could increase if noteholders need to rely on the sellers' remedy of breaches of representations and warranties.

RESULTS SUMMARY
All transactions have performed in line with our expectations to date. Fitch analysed the impact of the immediate 10% car price decline for the affected vehicles, which was assumed to last for the entire life of the transactions. No change to the values of unaffected cars was factored into the base scenario. This base scenario, the sensitivities outlined in the Special Report, together with transaction performance and an increase in credit enhancement since the last annual review are the basis for the rating actions.

The revision of the Outlooks to Negative from Stable on the class A and B notes of Driver UK Three and the class B notes of Driver UK two reflects the impact of Fitch's stress assumptions on the direct exposure of the transactions to the market values of returned vehicles through voluntary terminations and hand-ins at contract maturity. Driver UK two's class A notes have been affirmed with Stable Outlook, as they already benefit from increasing credit enhancement since it started amortising in April 2015.

The revision of the Outlook to Negative from Stable on the class A notes of Private Driver 2015-1 is a result of the stressed assumptions and the only immaterial build-up in credit enhancement during the revolving period, which will not end before December 2015.

The upgrade of the class B notes of VCL Multi-Compartment S.A. - Compartment 20 follows the transaction's robust performance, as expressed by increased credit enhancement since the last review. The class B notes are now able to support a 'AA' category rating even under stressed assumptions regarding the affected VW vehicles.

The revision of the Outlook to Positive from Stable on the class B notes of VCL Multi-Compartment S.A. - Compartment 21 and the class B notes of Driver thirteen UG (haftungsbeschraenkt) are also driven by the transactions' increase in credit enhancement and their increased ability to sustain Fitch's stressed assumptions on affected VW vehicles.

All other classes of notes have been affirmed as Fitch concluded they will not be materially affected by the stressed assumptions described in the Special Report. However, Fitch highlights that the affirmation of the notes outstanding under VCL Master Residual Value S.A. - Compartment 1 is based on their current credit enhancement, and not the minimum credit enhancement as per transaction documentation. If the credit enhancement moves towards this allowed minimum as a consequence of any tap-ups or take-outs allowed under the documentation, Fitch will test the robustness of the resulting structure at the time and may still take rating action if required.

All default and recoveries base cases remain unchanged at their previously set levels, except for Driver 13 and Private Driver 2015-1, for which the lifetime base case default rate assumptions were brought in line with the level of 1.8% set for the Driver Master transactions.

Fitch has taken no rating action on Driver UK Master S.A. - Compartment 2, which is currently in the process of extending its revolving period.

RATING SENSITIVITIES
Sensitivities were checked against the base case scenario. More information is available in the special report.

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action

DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

Prior to the transactions closing, Fitch reviewed the results of third party assessments conducted on the asset portfolio information (with the exception of VCL Multi-Compartment S.A. - Compartment 20), which indicated no adverse findings material to the rating analysis.

Prior to the transactions closing, Fitch conducted a review of a small targeted sample of the origination files and found the information contained in the reviewed files to be adequately consistent with the originators' policies and practices and the other information provided to the agency about the asset portfolios.

Overall Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable

SOURCES OF INFORMATION
The information below was used in the analysis.
- Loan-by-loan data for all transactions available at the European Data Warehouse as at 30 September 2015
- Share of NOx-affected vehicles per transaction, provided by Volkswagen Financial Services
- Investor reports for Driver France FCT Compartment Driver France Two provided by Volkswagen Bank, French Branch up to October 2015
- Investor reports for Driver Master S.A., Compartment 4, Driver Master S.A. - Compartment 5, Driver Master S.A., - Compartment 2, Driver Master S.A., - Compartment 1, Driver Master S.A., - Compartment 3, Driver thirteen UG (haftungsbeschraenkt), Private Driver 2015 - 1 UG (haftungsbeschraenkt) provided by Volkswagen Bank GmbH up to October 2015 (publication date)
- Investor reports for Driver UK two provided by Volkswagen Financial Services (UK) Limited up to October 2015 (publication date)
- Investor reports for VCL Master Residual Value S.A., Compartment 1, VCL Master S.A., Compartment 1, VCL Multi - Compartment S.A. - Compartment 19, VCL Multi - Compartment S.A. - Compartment 20, VCL Multi-Compartment S.A., - Compartment 21 provided by Volkswagen Leasing GmbH up to October 2015 (publication date)

REPRESENTATIONS AND WARRANTIES
A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for the asset class is available by accessing the appendix that accompanies the initial new issue report (see Driver France FCT Compartment Driver France Two - Appendix, dated 01 July 2015; Driver Master S.A., Compartment 4 - Appendix, dated 25 August 2015; Driver Master S.A. - Compartment 5 - Appendix, dated 25 August 2015; Driver Master S.A., - Compartment 2 - Appendix, dated 27 July 2015; Driver Master S.A., - Compartment 1 - Appendix, dated 27 July 2015; Driver Master S.A., - Compartment 3 - Appendix, dated 27 July 2015; Driver thirteen UG (haftungsbeschraenkt) - Appendix, dated 25 February 2015; Driver UK three - Appendix, dated 25 September 2015; Driver UK two - Appendix, dated 16 September 2015; Private Driver 2015 - 1 UG (haftungsbeschraenkt) - Appendix, dated 27 March 2015; VCL Master Residual Value S.A., Compartment 1 - Appendix, dated 25 September 2015; VCL Master S.A., Compartment 1 - Appendix, dated 25 September 2015; VCL Multi - Compartment S.A. - Compartment 19 - Appendix, dated 25 February 2014; VCL Multi - Compartment S.A. - Compartment 20 - Appendix, dated 27 October 2014; VCL Multi-Compartment S.A., - Compartment 21 - Appendix, dated 26 May 2015 at www.fitchratings.com). In addition refer to the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 12 June 2015 available on the Fitch website.