VW to Issue Dutch Auto Lease-Backed Securities

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Volkswagen is preparing to offer a new securitization of Dutch auto leases, according to a presale report from Standard & Poor’s.

VCL Master Netherlands B.V. is a Euro-denominated ABS that will issue two series of notes backed by €260.05 million (US$296 million) in outstanding principal of from more than 14,000 vehicle lease contracts, as well as €108.97 million (US$124.3 million) in receivables’ residual values.

The size of the Series A notes (with a preliminary ‘AAA’ structured finance rating from S&P) and the subordinate Series B notes are to be determined in the transaction set to close May 31. The Class B notes are rated ‘AA-’ by S&P.

The Series A notes will carry 33.4% credit enhancement, supported by subordination of the Class B notes and an unrated subordinated loan, as well as an overcollateralization cushion and a 1.2% cash reserve of the pool.

The lease contracts are from the Volkswagen Leasing B.V. (the servicer of the residuals) and seller Dutchlease B.V.  

The collateral in the pool comprises 14,485 vehicles tied to 9,126 private and commercial customers, according to S&P. New vehicles make up 95% of the pool, as well, with an average discounted lease receivable balance of €17,953 and an average of 46.4 months on original lease terms.

Vehicles in the pool include cars and light commercial vehicles mostly from Volkswagen (36.7% of the collateral pool), Seat (12.1%), and Audi (10.4%).

Volkswagen Leasing and Dutchlease are units of Volkswagen Pon Financial Services, which is owned by originators Volkswagen Financial Services AG in Germany and Pon Holdings B.V.  

S&P notes that 3.5% of the vehicles are affected by the remediation actions Volkswagen has undertaken to recall and repair vehicles involved in the worldwide vehicle emissions-fixing scandal affecting millions of Volkswagen and Audi vehicles worldwide. S&P believes that the remediation actions by Volkswagen will keep the vehicles roadworthy before and after the recall, preserving the expected residual value of the vehicles.

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