OREANDA-NEWS. Fitch Ratings says VCL Master Residual Value S.A.'s Compartment 2 notes' ratings will not be affected by the removal of the market risk reserve (MRR) that was posted at transaction closing for covering potential losses pending the repurchase of CO2-affected vehicles by the seller.

The transaction is a platform for VW Leasing GmbH (VWL) to securitise, on a revolving basis, residual values (see new issue report (VCL Master Residual Value S.A., Compartment 2), dated 25 November 2015).

At inception in November 2015, the MRR amounted to EUR89.2m, which corresponded to the estimated lease balance relating to CO2-affected vehicles (for more details on the emission allegations, see "VW Emissions Scandal: Impact on VW-Originated Auto ABS Transactions", dated 18 November 2015 and "Fitch: VW Emissions Updates Support Our EMEA ABS Assumptions", dated 17 December 2015).

On 3 November 2015, Volkswagen AG (VW) reported that engines in up to 800,000 cars were emitting CO2 at levels beyond those initially stated. Subsequently, VW stated on 9 December 2015 that most of these vehicles met the CO2 emission specification. Internal re-measurements found small deviations in only nine model variants with an annual production of approximately 36,000 vehicles.

Further, Fitch received a legal memorandum from transaction counsel who confirmed that the remaining increased CO2 emissions and thereby increased fuel consumptions as announced in VW's press release of 9 December 2015 constitute negligible deviations that do not result in remedies for the customer. Hence, no CO2-affected vehicles will be repurchased by the seller.

While an external re-measurement of the CO2-emissions is still pending, Fitch relies on the aforementioned VW-internal measurements and the legal memorandum issued by transaction counsel. Additionally, transaction noteholders have consented to removing the MRR.

Further transaction research is available at www.fitchratings.com.