Volkswagen Bank began marketing its EUR475 million ($648 million) auto loan receivables securitization deal, Diver Seven.

The deal has on offer EUR475.5 million triple-A notes and a EUR17.5million single-A plus rated notes. The Class B note in the deal builds on an earlier placement of Volkswagen’s VCL 11 mezzanine bonds. Driver Seven GmbH is a repeat securitization of auto loans originated by Volkswagen.

The issuance proceeds will be used to purchase a portfolio of German auto loan receivables originated by Volkswagen. The receivables to be acquired are secured by the financed vehicles and are granted exclusively to German residents.

The transaction is static and will start to amortize from closing. The provisional portfolio consists of 38,305 loan contracts, with an outstanding aggregate discounted principal balance of EUR500.0m. The loans have been granted by Volkswagen to buyers of new (60.6%) and used cars (39.4%). The portfolio is highly granular in terms of debtors - the top 20 obligors account for 0.33% of the portfolio - and regional distribution within Germany.

Initial credit enhancement for the class A notes will be 9.75%, comprising the subordination of the class B notes (3.5%), a subordinated loan (4.5%) provided by an affiliate of Volkswagen AG, overcollateralization, initially of 0.5%, and a cash collateral account (CCA) of 1.25%. The CCA will be fully funded at closing. Initial credit enhancement for the class B notes is 6.25%, provided by the subordinated loan, overcollateralization and the CCA.

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