Fitch Affirms Driver Australia One Trust and Driver Australia Two Trust

(The following statement was released by the rating agency)SYDNEY, October 14 (Fitch) Fitch Ratings has affirmed Driver Australia One Trust (Driver One) and Driver Australia Two Trust's (Driver Two) asset-backed floating-rate notes. The recent Volkswagen (DE:VOWG) (VW) scandal relating to failed emissions tests may be felt in the transactions primarily through its impact on used car prices. The exposure to affected diesel powered vehicles contained within both portfolios is relatively small with Driver One and Driver Two containing 12.3%, and 9.8%, respectively. The agency expects that any impact on these transactions will relate to recoveries rather than defaults. Even if recoveries on the affected vehicles were assumed to be zero in both transactions, Fitch does not anticipate a rating impact.These transactions are securitisations that are backed by Australian automotive finance receivables originated by Volkswagen Financial Services Australia Pty Ltd (VWFSA), a wholly-owned subsidiary of Volkswagen Financial Services AG (A/F1, both on Rating Watch Negative). The rating actions are as follows:Driver OneAUD111.6m Class A (ISIN AU0000DAOHA1) affirmed at 'AAAsf'; Outlook StableAUD15.9m Class B (ISIN AU0000DAOHB9) affirmed at 'AAsf'; Outlook StableDriver TwoAUD354.7m Class A (ISIN AU0000DAQHA6) affirmed at 'AAAsf'; Outlook StableAUD27m Class B (ISIN AU0000DAQHB4) affirmed at 'A+sf'; Outlook StableKEY RATING DRIVERSThe affirmations reflect: the potential interest losses due to prepayments have been substantially lower than Fitch's stressed assumptions; the available credit enhancement has increased due to sequential pay down of the notes; the stable credit quality and performance of the pool; and Fitch's expectations of continued benign economic conditions in Australia in the near term. At settlement, each respective trust purchased the securitised receivables discounted at a single discount rate equivalent to the aggregate of the fixed swap rate (including margins), and senior expenses and servicing fees. As such, the transactions yield no excess income to cover or reimburse losses, and are exposed to losses should high interest yielding receivables prepay or default. Under the transaction documents VWFSA is obligated to make interest compensation payments to the trusts if a receivable that has an interest rate higher than the discount rate at issuance is discharged. In its initial ratings Fitch assumed various levels of stressed prepayment rates and made the additional assumption that VWFSA was unable to make these payments. Additional credit support was also provided at issuance through a funded cash collateral account available to cover any potential interest shortfalls. Actual prepayments and discharges at August 2015 were well within Fitch's stressed assumptions, and consequently, the credit enhancement available to cover losses increased. The performance of assets backing Driver One and Driver Two have been in line with, or better than, Fitch's base case expectations. At August 2015, net losses since closing had reached 0.2% (AUD955,408) and 0.0% (AUD5,132) of the original portfolio balance for Driver One and Driver Two, respectively. The 30+ day delinquencies were 0.92%, and 0.32% for Driver One and Driver Two, respectively which are both well below Fitch's 2Q15 ABS Dinkum index of 1.34%. The notes for Driver One are amortising on a pro-rata basis as targeted overcollateralisation (OC) levels have been met. The Driver Two notes have been amortising sequentially from closing and are expected to amortise on a pro-rata basis when targeted overcollateralisation (OC) levels are reached, subject to cumulative net loss triggers at various points in time. The initial target OC percentages are 26% and 18% for the Class A and B notes respectively, provided net losses remain below the first trigger level of 0.4% (up to March 2016), and 0.8% for any payment date from April 2016 to March 2017, and 1.2% thereafter.RATING SENSITIVITIES The prospect of downgrades is considered remote at present given the expected performance of both Driver One and Driver Two portfolios, and the level of subordination available for each class of notes for their respective ratings. DUE DILIGENCE USAGE No third party due diligence was provided or reviewed in relation to this rating action.DATA ADEQUACY Fitch conducted a file review of 10 sample loan files focusing on the underwriting procedures conducted by VWFSA compared to its credit policy at the time of underwriting. Fitch has checked the consistency and plausibility of the information and no material discrepancies were noted that would impact Fitch's rating analysis.A comparison of the transaction's representations, warranties and enforcement mechanisms (RW&Es) to those of typical RW&Es for this asset class is available by accessing the reports and/or links under Related Research below.Contacts: Lead Surveillance Analyst Spencer WilsonPhone +61 2 8256 0320Fitch Australia Pty Ltd., Level 15, 77 King St, Sydney, NSW 2000Committee Chairperson Alison Ho Senior Director+852 2263 9937Media Relations: Leni Vu, Sydney, Tel: +61 2 8256 0304, Email: leni.vu@fitchratings.com.Additional information is available at www.fitchratings.com.Sources of Information:The source of information used to assess these ratings was Volkswagen Financial Services Australia Pty Ltd. The issuer has informed Fitch that not all relevant information about the rated notes is public.Applicable Criteria APAC Consumer ABS Rating Criteria (pub. 24 Jul 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=752957Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 14 May 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744175Global Structured Finance Rating Criteria (pub. 06 Jul 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952Related Research Driver Australia One Trust - Appendixhttps://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=726509Driver Australia Two Trust - Appendixhttps://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863637Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867166Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr _id=992236Solicitation Status https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=992236Endorsement Policy https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&det ail=31ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S FREE WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Fitch Australia Pty Ltd holds an Australian financial services licence (AFS licence no. 337123) which authorises it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001.