OREANDA-NEWS. Fitch Ratings has assigned VCL Master S.A.'s Series A 2015-1 notes issued under Compartment 1 the following rating:

EUR45.2m Series A 2015-1 (ISIN: XS1309693643), due September 2022: 'AAAsf'; Outlook Stable

The agency has affirmed the ratings of all other outstanding series of notes, as follows:

EUR106.4m Series A 2010-1 (ISIN: XS0480715464): affirmed at 'AAAsf'; Outlook Stable
EUR131.1m Series A 2010-2 (ISIN: XS0480715548): affirmed at 'AAAsf'; Outlook Stable
EUR85.8m Series A 2010-4 (ISIN: XS0480716199): affirmed at 'AAAsf'; Outlook Stable
EUR53.4m Series A 2011-2 (ISIN: XS0646441575): affirmed at 'AAAsf'; Outlook Stable
EUR39.9m Series A 2012-1 (ISIN: XS0857704976): affirmed at 'AAAsf'; Outlook Stable
EUR65.6m Series A 2012-2 (ISIN: XS0857705353): affirmed at 'AAAsf'; Outlook Stable
EUR65.6m Series A 2012-3 (ISIN: XS0857705866): affirmed at 'AAAsf'; Outlook Stable
EUR118.8m Series A 2012-4 (ISIN: XS0857706161): affirmed at 'AAAsf'; Outlook Stable
EUR65.6m Series A 2013-1 (ISIN: XS0950403229): affirmed at 'AAAsf'; Outlook Stable
EUR63.9m Series A 2013-2 (ISIN: XS0974292350): affirmed at 'AAAsf'; Outlook Stable
EUR11.6m Series B 2014-1 (ISIN: XS1112835910): affirmed at 'AAsf'; Outlook Stable
EUR9.2m Series B 2014-2 (ISIN: XS1112836645): affirmed at 'AAsf'; Outlook Stable
EUR11.6m Series B 2014-3 (ISIN: XS1112837379): affirmed at 'AAsf'; Outlook Stable
EUR2.8m Series B 2014-4 (ISIN: XS1112837882): affirmed at 'AAsf'; Outlook Stable

The transaction is a platform for Volkswagen Leasing GmbH (VWL), a subsidiary of Volkswagen Financial Services AG, which is itself a subsidiary of Volkswagen AG (BBB+/Negative/F2) to securitise on a revolving basis German auto lease receivables originated during its ordinary course of business.

KEY RATING DRIVERS
Series A 2015-1 was issued on 26 October 2015, and ranks pari passu with the outstanding class A series.

The affirmation of all other outstanding series follows the sale of receivables from VCL Master S.A.'s Compartment 1 for EUR857.2m. Receivables were sold by VWL on the authority granted by VCL Master Compartment 1. Following the removal of assets, the portfolio has been reduced to EUR924.4m from EUR1.78bn. In addition, the replenishing account has been funded with EUR66.8m, which can be used to purchase additional assets. This cash increases the credit enhancement (CE).

As only performing receivables were removed, the relative share of non-performing receivables in the pool has increased. However, this portfolio deterioration is captured by the redemption mechanism, which applies funds received from the sale of the receivables first to amortise the rated series of notes to a certain target level. Only the remaining portion is then used to amortise the sub-loan. The target level is calculated assuming losses of 13% for performing contracts (class A) and 70% for delinquent contracts (class A); 96.5% for performing contracts (class B) and 94% for delinquent contracts (class B). For terminated contracts, the applied loss is 100% for both classes of notes.

This redemption mechanism results in higher available CE since the rated notes redemption amount exceeds the sub-loan redemption amount in relative terms.

Following the removal of the assets, the total available CE has risen to 17.5% from 16.2% for the class A notes and to 13.7% from 12.5% for the class B notes. Available CE consists of over-collateralisation through the sub-loan, a discount for over-collateralisation, the floor amount of a reserve fund and the funds in an accumulation account that can be used to purchase additional lease receivables. CE is sized to protect noteholders against the credit risk of the underlying lease receivables, as well as seller risks such as remaining commingling risks. The current available CE exceeds the CE of 13.6% for class A and 10.1% for class B, on which Fitch's analysis for the rating renewal in September 2015 was based.

After take-out, 18.8% of leased vehicles (by volume in % of the pool balance) have been reported as affected by VW's manipulation of nitrogen oxide (NOx) emission tests. Fitch expects at least a temporary impact on the used car prices for these vehicles (see Rating Sensitivities).

The portfolio also contains vehicles affected by the recent CO2 emission allegations. The estimated balance of CO2 affected vehicles is 5.8% of the current pool balance after take-out. The seller has committed itself to repurchase CO2 affected vehicles as soon as identified, starting in December 2015. The seller also committed to posting a reserve to cover the total outstanding balance of CO2 affected vehicles pending the repurchase of vehicles expected to be in the pool but not yet identified.

Following the downgrade of Volkswagen AG below 'A'/'F1', the servicer is contractually obliged to advance to the issuer scheduled instalments three business days prior to a given monthly period.

RATING SENSITIVITIES
Rating sensitivities are described in the new issue report published on 25 September 2015 at www.fitchratings.com.

Additionally, scenarios reducing recovery rates further were analysed, thus simulating a permanent damage to VW's brand image. For example, a decrease in the recovery rate base case of NOx-affected vehicles by 25% and a simultaneous decrease in the recovery rate base case of non-affected vehicles by 10% would not lead to a downgrade of the notes' ratings. For more details, see 'VW Emissions Scandal: Impact on VW-Originated Auto ABS Transactions' at www.fitchratings.com.

TRANSACTION CHARACTERISTICS
The transaction documents allow for a transfer of the acquired assets from VCL Master to feed term take-outs that may be initiated by VWL (which is the current case). The portfolio may change materially upon a term take-out. Therefore, the documents foresee that Fitch receives a confirmation request prior to the execution of the onward transfer.

Under certain conditions, the issuer may increase the amounts of the existing series of notes to purchase further assets. Receivables purchased with such funds are transferred applying the initial purchase price discount for overcollateralisation of 1.1%. This discount is lower than the discount applied to purchase receivables during the replenishment period (2.23%).

DUE DILIGENCE USAGE
Fitch was provided with a third party asset portfolio assessment at transaction closing as of September 2015.

DATA ADEQUACY
Fitch reviewed the results of the third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis. Fitch believes the sample size and relevance of the tested fields suggest that the data provided by the originator for assigning the ratings was of acceptable quality.

Fitch also 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.

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.

SOURCES OF INFORMATION
The information below was used in the analysis:
- Investor reports provided by originator
- Take-out calculations provided by originator