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Volkswagen revives U.S. lease ABS platform, sans diesel autos

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Volkswagen Credit is going diesel-free for its first securitization of new vehicle leases in the U.S. since 2015.

Volkswagen Auto Lease Trust 2019-A will be a $1 billion bond sale (or $1.3 billion if upsized) backed by lease contract balances and expected end-lease resale values of new Volkswagen- and Audi-branded vehicles financed at Volkswagen Group of America dealerships.

In the pool of 46,070 cars in the $1 billion pool or 59,863 in the $1.3 billion pool, none are equipped with diesel engines that were at the center of Volkswagen’s worldwide emissions scandal in 2015. The year the company was found to have equipped software on vehicles to evade emissions testing in the U.S.

The scandal affected over 550,000 vehicles in the U.S. and up to 11 million worldwide, leading to an eventual $14.7 billion settlement with U.S. authorities. Volkswagen also pulled out of the asset-backed market amid investor concerns about the company’s legal (and criminal) exposure. VW Credit resumed auto-loan securitizations in the U.S. in 2018.

Volkswagen has ceased selling diesel vehicles stateside. They remain a staple of European sales, despite regional and national restrictions arising in Europe against the use of diesel cars in urban centers.

The 2019-A transaction will feature four classes of senior notes, including three term-note offerings with preliminary AAA ratings from Fitch Ratings and S&P Global Ratings. The Class A-2 notes maturing in March 2022 will be sized at either $410 million or $532 million in the upsized pool, and will be split between fixed- and floating-rate bonds.

The Class A-3 notes will be either $335 million or $435 million, due November 2022, while the A-4 notes will total either $75 million or $98 million, with an August 2024 maturity.

A money-market tranche is also planned at $180 million or $235 million. Those notes carry the top short-term ratings from Fitch (F1+) and S&P (A-1+).

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