Driver Australia eleven Trust has issued A$400 million ($262 million) of pass-through floating-rate notes, which are backed by a pool of first-ranking Australian consumer and commercial auto loan receivables originated by Volkswagen Financial Services Australia Pty Ltd. VWFSA is 100% owned by Volkswagen Financial Services Overseas AG, part of Germany's Volkswagen.
The total collateral pool at the 31 March 2025 cut-off date comprised 7,355 receivables for new and used vehicles with a weighted-average remaining maturity of 50.9 months and an average discounted receivables balance of A$54,384 ($35,733). The transaction, VFWSA's first for 2025, is the 12th term ABS issue by the company in Australia.
VWFSA has been operating a traditional captive finance model in Australia since 2001 providing wholesale funding to automotive dealers, financing auto loans to retail customers, and more recently offering fleet services such as operating leases and fleet maintenance. It originates retail auto loans through a network of largely Volkswagen, Audi and Skoda dealerships distributed throughout Australia.
The notes will be issued by Perpetual Corporate Trust Ltd as trustee of Driver Australia eleven Trust. VWFSA, the originator and servicer, is rated Baa1/(P)P-2 by Moody's Ratings, which says VWFSA's current rating limits the transaction's exposure to operational risks.
The expected closing date is July 25, 2025 and the joint lead managers are BofA Securities, Australia and New Zealand Banking Group, and Japan's SMBC Bank International.
Moody's says the transaction's key strengths include its high level of granularity, with the largest obligor representing 0.2% of the pool and the 10 largest obligors representing 1.6%; the rich history of performance data for VWFSA auto loans; and VWFSA's experience and financial stability as originator and servicer. A key credit challenge is the relatively higher-than-average exposure to receivables with balloon payments compared with peer Australian auto loan portfolios.
Of the portfolio, 43.1% comprises receivables requiring a balloon payment at the end of the receivable term, Moody's notes. The aggregate of the balloon payments constitute 18.1% of the current portfolio balance.
"Loans with a balloon payment are subject to refinancing and consequently we expect higher defaults on balloon loans in a manufacturer default scenario and have taken this into consideration in our quantitative analysis," it says.
The transaction has several sources of credit enhancement, including the subordinated loan, initial over-collateralization, and a non-amortizing cash collateral reserve fully funded at closing. Fitch says that the cash collateral account sized at A$4.8 million ($3.15 million), representing 1% of the notes, is sufficient to mitigate payment interruption risk.
Fitch has assigned an expected rating of AAA to the A tranche, but didn't rate the B tranche. Moody's has provisionally assigned AAA to the A tranche which represents 85.7% of the notes and AA3 to the B notes, which account for 8.5 % of the notes. Neither Fitch nor Moody's rated the subordinated loans which represent 4.8% of the notes.
