Fitch Assigns Final Ratings to Driver Australia five Trust

(The following statement was released by the rating agency) Fitch Ratings-Sydney-April 26: Fitch Ratings has assigned final ratings to Driver Australia five Trust's automotive-backed floating-rate notes. The issuance consists of notes backed by Australian automotive receivables originated by Volkswagen (DE:VOWG_p) Financial Services Australia Pty Ltd (VWFSA), a wholly owned subsidiary of Volkswagen Financial Services AG, itself wholly owned by Volkswagen AG (VW, BBB+/Stable/F2). The ratings are as follows: AUD661.5 million Class A notes: 'AAAsf'; Outlook Stable; AUD37.5 million Class B notes: 'AA-sf'; Outlook Stable; AUD43.5 million subordinated loan: 'NRsf' The notes are issued by Perpetual Corporate Trust Limited in its capacity as trustee of Driver Australia five Trust. At the 28 February 2018 cut-off date, the total collateral pool consisted of 26,849 contracts, of new (81.1%) and used (18.9%) motor vehicles, with weighted-average seasoning and remaining term of 13.1 and 46.0 months, respectively. The main products offered within the portfolio are chattel mortgages (37.5%) and consumer loans (62.3%). The portfolio is of similar credit quality to prior pools securitised under the Driver Australia programme. KEY RATING DRIVERS Obligor Default Risk: Obligor default and recovery rates are a key assumption in Fitch's quantitative analysis. Fitch's derived default base-case expectations are lower than those of the most recent Driver Australia issuance, which reflects the improved performance of the underlying assets. Cash Flow Dynamics: The transaction does not benefit from excess spread, a common feature of ABS securitisations; instead, receivables are purchased based on a discount rate method. The aggregate principal of the notes, subordinated loan and overcollaterlisation (OC) equals the purchased receivables discounted at a rate of 8.89%. Structural Risks: Mechanisms, based on various performance triggers, provide increasing levels of OC support for noteholders. The notes will amortise sequentially in order of seniority until certain OC target levels are met. Once these target levels are met for the class A and B notes, any additional principal will be allocated to repay the subordinated loan. Counterparty Risks: An advance mechanism is in place, whereby collections are prepaid and segregated from VWFSA's own funds. Interest rate swaps will be present with triggers that meet Fitch's counterparty criteria. Servicer, Operational Risks: There is no back-up servicer, and the transaction is reliant on VWFSA's operational and credit-assessment capabilities. Fitch believes the transaction documents appropriately address seller- and servicer-related risks, like commingling and set-off. An advance mechanism ensures collections are prepaid and segregated from VWFSA's funds. Balloon Risks: Obligors that are subject to balloon payments are required to make such payments if the balloon payment cannot be refinanced. The pool contains 37.4% contracts that are subject to balloon payments, higher than in peer transactions. RATING SENSITIVITIES Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than Fitch's base case, which is likely to result in a decline in credit enhancement and remaining loss-coverage levels available to the notes. Fitch has evaluated the sensitivity of the ratings assigned to Driver Australia five Trust to increased gross default levels and decreased recovery rates over the life of the transaction. Impact upon the note rating of increased defaults: Initial rating: AAAsf/AA-sf Increase defaults by 10%: AA+sf/AA-sf Increase defaults by 25%: AA+sf/A+sf Increase defaults by 50%: AA-sf/A-sf Impact upon the note rating of decreased recoveries: Initial rating: AAAsf/AA-sf Reduce recoveries by 10%: AAAsf/AA-sf Reduce recoveries by 25%: AA+sf/A+sf Reduce recoveries by 50%: AA+sf/A+sf Impact upon the note rating of multiple factors: Initial rating: AAAsf/AA-sf Increase defaults by 10%; reduce recoveries by 10%: AA+sf/A+sf Increase defaults by 25%; reduce recoveries by 25%: AAsf/Asf Increase defaults by 50%; reduce recoveries by 50%: Asf/ BBBsf Key rating drivers and rating sensitivities are further discussed in the corresponding new issue report entitled "Driver Australia five Trust", published today. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and relate to the underlying asset pool is available by accessing the appendix referenced under "Related Research" below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated 31 May 2016. DATA ADEQUACY Fitch reviewed a small targeted sample of VWFSA's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Overall, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. SOURCES OF INFORMATION The information below was used in the analysis: Loan-by-loan data provided by VWFSA as of 31 March 2018 Historical performance and delinquency data provided by VWFSA as of 31 December 2017 Transaction documents provided by King Wood Mallesons, the issuer's counsel. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public. Contacts: Primary Analyst Marija Buzevska Analyst +612 8256 0340 Fitch Australia Pty Ltd Level 15, 77 King St, Sydney, NSW 2000 Secondary Analyst David Carroll Director +61 2 8256 0333 Committee Chairperson Claire Heaton Senior Director +612 8256 0361 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Consumer ABS Rating Criteria (pub. 11 Dec 2017) https://www.fitchratings.com/site/re/907089 Fitch's Interest Rate Stress Assumptions for Structured Finance and Covered Bonds - Excel File (pub. 02 Feb 2018) https://www.fitchratings.com/site/re/10018863 Global Structured Finance Rating Criteria (pub. 03 May 2017) https://www.fitchratings.com/site/re/897411 Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 23 May 2017) https://www.fitchratings.com/site/re/898537 Structured Finance and Covered Bonds Counterparty Rating Criteria: Derivative Addendum (pub. 23 May 2017) https://www.fitchratings.com/site/re/898538 Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria (pub. 02 Feb 2018) https://www.fitchratings.com/site/re/10018549 Related Research Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions https://www.fitchratings.com/site/re/882358 Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/site/dodd-frank-disclosure/10028067 Solicitation Status https://www.fitchratings.com/site/pr/10028067#solicitation Endorsement Policy https://www.fitchratings.com/regulatory ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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