Fitch to Rate Volkswagen Auto Loan Enhanced Trust 2014-1; Issues Presale

NEW YORK--()--Fitch Ratings expects to assign the following ratings and Rating Outlooks to the notes issued by Volkswagen Auto Loan Enhanced Trust 2014-1 (VALET 2014-1):

--$230,000,000 class A-1 notes 'F1+sf';

--$335,000,000 class A-2 notes 'AAAsf'; Outlook Stable;

--$335,000,000 class A-3 notes 'AAAsf'; Outlook Stable;

--$100,000,000 class A-4 notes 'AAAsf'; Outlook Stable.

KEY RATING DRIVERS

Strong Collateral Quality: The weighted average (WA) FICO score of 763 is consistent with recently issued VALET transactions and, combined with the strong internal credit-tier distribution, indicates a strong borrower. The concentration of extended term loans has decreased from the previous transactions.

Sufficient Credit Enhancement: VALET 2014-1 incorporates a sequential-pay structure. Initial credit enhancement (CE) is 3.10% of the initial adjusted pool balance, growing to 3.50% consistent with recent Volkswagen transactions. Annual excess spread is expected to be 1.87%. Consistent with expected ratings of 'AAAsf', CE is sufficient to cover in excess of a 5.0x multiple of Fitch's base case expected lifetime cumulative net losses (CNLs) of 1.20%.

Strong Portfolio/Securitization Performance: Losses and delinquencies on Volkswagen Credit Inc.'s (VCI) portfolio and securitizations have shown continued improvement from the peak levels observed in the 2007 and 2008 vintages and have stabilized at low levels since 2010.

Stable Corporate Health: Fitch rates the parent Volkswagen Group 'A-' with a Positive Rating Outlook. Volkswagen has recorded positive corporate financial results in recent years, and its overall corporate health has remained strong.

Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of VCI would not impair the timeliness of payments on the securities.

Stable Origination/Underwriting/Servicing: Fitch believes VCI to be a capable originator, underwriter and servicer. These capabilities are further evidenced by historical portfolio delinquency and loss experience and securitization performance.

RATING SENSITIVITIES

Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than the base case. In turn, it could result in potentially adverse rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to all classes of VALET 2014-1 to increased losses over the life of the transaction. Fitch's analysis found that the notes display some sensitivity to increased defaults and losses. In fact, they could lead to potential downgrades of up to one category under Fitch's moderate (1.5x base case loss) scenario. The notes could experience downgrades of up to three rating categories under Fitch's severe (2.5x base case loss) scenario.

Key Rating Drivers and Rating Sensitivities are further described in Fitch's presale report, available at 'www.fitchratings.com' or by clicking on the above link.

Fitch's analysis of the Representation and Warranties (R&W) of this transaction can be found in Volkswagen Auto Loan Enhanced Trust 2014-1--Appendix'. These R&W are compared to those of typical R&W for the asset class as detailed in Fitch's April 17, 2012 special report, 'Representations, Warranties, and Enforcement Mechanisms in the Global Structured Finance Transactions'.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 2013);

--'Rating Criteria for U.S. Auto Loan ABS' (April 2014);

--'Structured Finance Tranche Thickness Metrics' (July 2011);

--'Volkswagen Auto Loan Enhanced Trust 2014-1 -- Appendix' (April 2014).

Applicable Criteria and Related Research: Volkswagen Auto Loan Enhanced Trust 2014-1 (US ABS)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=746765

Structured Finance Tranche Thickness Metrics

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=646951

Rating Criteria for U.S. Auto Loan ABS

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=738718

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=827343

ALL 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 PUBLIC WEBSITE '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.

Contacts

Fitch Ratings, Inc.
Primary Analyst
Melvin Zhou
Director
+1-212-908-1503
Fitch Ratings, Inc., 33 Whitehall Street, New York, NY 10004
or
Secondary Analyst
Puloma Mukherjee
Associate Director
+1-212-908-9131
Fitch Ratings, Inc., 33 Whitehall Street, New York, NY 10004
or
Committee Chairperson
Hylton Heard
Senior Director
+1-312-268-2091
or
Media Relations:
Alyssa Castelli, New York, 212-908-0540
alyssa.castelli@fitchratings.com

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Contacts

Fitch Ratings, Inc.
Primary Analyst
Melvin Zhou
Director
+1-212-908-1503
Fitch Ratings, Inc., 33 Whitehall Street, New York, NY 10004
or
Secondary Analyst
Puloma Mukherjee
Associate Director
+1-212-908-9131
Fitch Ratings, Inc., 33 Whitehall Street, New York, NY 10004
or
Committee Chairperson
Hylton Heard
Senior Director
+1-312-268-2091
or
Media Relations:
Alyssa Castelli, New York, 212-908-0540
alyssa.castelli@fitchratings.com