OREANDA-NEWS. S&P Global Ratings today took various credit rating actions in Driver Eleven GmbH and Driver Twelve GmbH.

Specifically, we have:Raised to 'AA (sf)' from 'A+ (sf)' and removed from CreditWatch positive our rating on Driver Eleven's class B notes;Raised to 'AA - (sf)' from 'A+ (sf)' and removed from CreditWatch positive our rating on Driver Twelve's class B notes; andAffirmed our 'AAA (sf)' ratings on the class A notes in both transactions (see list below). Today's rating actions follow our review of the transactions' performance since closing in July 2013 and May 2014, respectively (see "Related Research").

On May 10, 2016, we placed on CreditWatch positive our ratings on the class B notes in both transactions, due to improved performance and increased credit enhancement (see "Ratings On Five German VW Auto ABS Transactions' Class B Notes Placed On CreditWatch Positive Due To Performance").

We have analyzed credit risk under our European auto asset-backed securities (ABS) criteria, using the transactions' historical net loss data (see "Methodology And Assumptions For European Auto ABS," published on Oct. 15, 2015). The data show that the default level for both transactions is lower than our expectations at closing. In our base-case scenario, we forecast that Germany will record GDP growth of 1.7% in 2016, 1.5% in 2017, and 1.4% in 2018, compared with 1.5% in 2015. At the same time, we expect unemployment rates to stabilize at historically low levels. We have therefore lowered our net loss base-case assumptions. We have also adjusted our recovery assumptions in line with other recent German auto loan and leasing ABS deals issued by Volkswagen Bank GmbH and Volkswagen Leasing GmbH.

The available credit enhancement for the class A and B notes in both transactions has increased since closing. This is because the notes have amortized sequentially until they reached their overcollateralization targets (11% for the class A notes and 7% for the class B notes). Once the transactions reached these targets, the issuer began paying principal pro rata to the class A and B noteholders.

We also believe that the buildup of credit enhancement through deleveraging is likely to outweigh any potential negative effect on collateral performance caused by the emission manipulations.

We believe that Volkswagen AG's (VW) admission on Sept. 22, 2015, that it installed software designed to manipulate diesel engine exhaust emissions in relation to nitrogen oxides (NOx) in 11 million passenger cars and commercial vehicles could ultimately affect the transactions in a number of areas: potential declines in the realization proceeds if borrowers/lessees default, potential dilution of the receivables backing the transaction as a result of vehicle owner claims against VW, and potential increase in the operational risk associated with VW. Based on VW's public announcements, we assume that the proposed remediation actions will not result in a change to the fuel economy figures, performance figures, or CO2 or noise emissions, and that the vehicles will remain roadworthy until and after a recall. Hence, based on the currently available information, we do not assume potential dilution of the receivables backing the transaction as a result of vehicle owner claims against the seller.

As a result of our revised net loss expectations, revised recovery rate assumptions, and the transactions' increased credit enhancement, we have raised to 'AA (sf)' from 'A+ (sf)' and removed from CreditWatch positive our ratings on Driver Eleven's class B notes. We have raised to 'AA - (sf)' from 'A+ (sf)' and removed from CreditWatch positive our rating on Driver Twelve's class B notes. At the same time, we have affirmed our 'AAA (sf)' ratings on the class A notes in both transactions because we consider that the available credit enhancement is commensurate with the currently assigned ratings.

Our counterparty, operational, and legal risk analysis remains unchanged since closing.

The transactions' collateral comprises auto loans that Volkswagen Bank GmbH granted to borrowers who are resident in Germany.