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Volkswagen Offers German Auto ABS Via New Master Trust Program

Volkswagen Bank GmbH plans to sell €1.25 billion ($1.42 billion) of bonds backed by German auto loan receivables. The transaction, called Driver Master SA-Compartment 1, has been assigned provisional ratings from Moody’s Investors Service and DBRS.

The series 2015 deal offers €1.13 billion class A notes that benefit from initial credit enhancement (CE) of 9.45% and are rated ‘Aaa’/’AAA’ by Moody’s and DRBRS, respectively. The €52.5 million class B notes are rated ‘Aa3’/’A’ and benefit from initial credit enhancement of 5.25%. All of the notes are due May 25, 2024.

There is also an unrated €62.5 million subordinated loan being marketed.

In its presale report, DBRS notes that “The issuer is structured as a master trust and may issue further Class A notes and Class B notes the issuance proceeds of which should be used to purchase additional receivables to provide adequate enhancement to the notes. Both the existing and the newly issued notes will be backed by the aggregated pool of receivables.”

Volkswagen Financial Services AG and Commerzbank AG are co-arranging the deal.

Driver Master SA-Compartment 1 is backed by a pool of 92,227 auto loans secured by new (50.2%) and used (49.8%) vehicles.  Loans in the pool have a weighted average (WA) original term of 50.12 months and WA seasoning of 13.14 months.

Nearly half of the pool is comprised of Volkswagen models (44.76%), followed by Audi at 26.72%. The regions with exposure to the highest percentage of the loans are North Rhine Westphalia (19.2%), Bavaria (13.3%), and Baden-Wuertemberg (11.4%).

Both Moody’s and DBRS cite the experience of the originator as a key strength of the latest deal. To date, Volkswagen Bank GmbH has completed 25 public auto loan ABS transactions globally, with 13 of them in Germany. Both ratings agencies note that the latest deal is structurally similar to previous transactions, which have low historical net loss and high recovery. 

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