Driver Australia Five Trust ABS Assigned Ratings

Stocks and Financial Services Press Releases Thursday April 26, 2018 09:57
MELBOURNE--26 Apr--S&P Global Ratings

MELBOURNE (S&P Global Ratings) April 26, 2018--S&P Global Ratings today assigned its ratings to two classes of asset-backed securities (ABS) issued by Perpetual Corporate Trust Ltd. as trustee of Driver Australia five Trust (see list). The notes are backed by chattel mortgage, commercial hire-purchase, and consumer loan contracts secured by passenger and light commercial motor vehicles that were originated by Volkswagen Financial Services Australia Pty Ltd. (VWFS Australia).

This is the fifth closed-pool term transaction backed by collateral originated by VWFS Australia. The ratings reflect the following factors:
  • The credit risk of the underlying collateral portfolio and the credit support available are commensurate with the ratings assigned. Credit support for the class A notes comprises the subordination of the class B notes and the subordinated loan, and overcollateralization. Credit support for the class B notes includes the subordination of the subordinated loan and overcollateralization. In addition, any balance remaining in the cash reserve on the maturity date of the notes or when the receivables pool balance reaches zero may be applied toward redemption of the class A and class B notes, providing additional support.
  • All contract payments, including the residual or balloon payments, are an obligation of the borrower. As a result, the trust is not exposed to any market-value risk associated with the sale of the motor vehicles (on performing receivables), which is a risk that may be associated with other products, such as operating leases.
  • The issuer has the capacity to pay interest to the class A and class B note holders in full on each interest payment date, and to repay principal in full no later than the final maturity date, under rating stresses commensurate with the ratings assigned. All rating stresses are made on the basis that the issuer does not call the notes on or beyond the call-option date, and that the notes must be fully redeemed via the mechanisms under the transaction documents. Timely payment of senior expenses and note interest is supported by the use of principal collections and an amortizing cash reserve funded on the transaction closing date. The reserve is sized at 1.2% of the discounted receivables balance, as well as being subject to a floor of the lesser of A$7.5 million and the outstanding amount of the class A and class B notes.
  • The legal structure of the issuer, which is established as a special-purpose entity, and meets our criteria for insolvency remoteness.
  • Our ratings also take into account the counterparty support provided by Australia and New Zealand Banking Group Ltd. (ANZ) as bank account provider and by Credit Agricole Corporate and Investment Bank as interest-rate swap provider. Fixed- to floating-rate interest-rate swaps are provided to hedge the mismatch between the fixed-rate payments on the receivables and the floating-rate interest payable on the notes. The transaction documents for the swap and bank accounts include downgrade language consistent with our "Criteria: Counterparty Risk Framework Methodology And Assumptions" criteria, published on June 25, 2013, that requires the replacement of the counterparty or other remedy, should its rating fall below the applicable rating.
A copy of S&P Global Ratings' complete report for Driver Australia five Trust can be found on RatingsDirect, S&P Global Ratings' web-based credit analysis system, at http://www.capitaliq.com.
RATINGS ASSIGNED
Class Rating Amount (mil. A$)
A AAA (sf) 661.5
B A+ (sf) 37.5

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