Volkswagen is returning to the securitization market for the first time since news broke that the automaker had rigged diesel vehicles to cheat emissions tests.

Despite concerns that reduced confidence in the brand could reduce sales, and by extension, recovery values, VCL 22 is backed by German leases on both diesel and non-diesel cars, according to rating agency reports.

However the deal is currently unsized, suggesting Volkswagen is testing the waters.

On Sept. 22, the U.S. Environmental Protection Agency issued Volkswagen a notice of violation of the Clean Air Act. The EPA alleges that certain Volkswagen and Audi vehicles with four-cylinder diesel engines contain software that detects when the car is undergoing official emissions testing; the software turns full emissions controls on only during these tests.

Last week, VW announced that it would recall 8.5 million cars in Europe; 2.4 million of the recalls are vehicles registered in Germany. 

A total of 16,933 contracts, or around 20%, of the €100 million ($113.4 million) portfolio of German auto leases in the VCL 22 pool, are affected by the manufacturer’s recall.

By comparison, Santander chose to exclude Volkswagen vehicles in a securitization of Finnish auto loans launched last week.

Analysts have speculated that the recall could result in higher losses for VW securitizations if lessees look to get out of their contracts.

Moody's Investors Service said in a September report that it expects VW will fix the affected vehicles in Europe and, as necessary, support its dealer network, which will mean that VW lessees and loan borrowers in Europe will have no incentive to rescind on their obligations. However, a rise in vehicle return rates, coupled with higher defaults, could result in higher losses for asset-backeds.

 Moody's and DBRS have assigned preliminary 'Aaa'/'AAA' ratings to the class A notes and 'A1'/'A' ratings to the class B notes to be issued by the VCL 22 trust. 

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