Solving financial and strategic problems via securitisation SPVs: Case study of Volkswagen

This study investigates the resilience of European Auto Asset-Backed Securities (ABS) during the COVID-19 and inflationary crises, analyzing the Volkswagen Driver UK Master C5. Employing OLS regressions and Process Tracing, the research evaluates macroeconomic impacts on the fund's Credit and Extension Risks. The findings reveal an economic paradox: historic inflation suppressed defaults, as supply chain disruptions artificially inflated used-car prices, granting consumers temporary wealth. Conversely, rising SONIA interest rates significantly accelerated early prepayments. Furthermore, the Special Purpose Vehicle (SPV) remained shielded by robust contractual safeguards, namely the Guaranteed Minimum Future Value (GMFV) and Redelivery Repurchase clauses, forcing the originator to absorb asset depreciation. Ultimately, while standard Auto ABS structures proved undeniably resilient, the recent suppression of defaults was a unique byproduct of an atypical asset bubble rather than a permanent shift in credit risk dynamics.