The $1.2 billion Volkswagen AG settlement approved by a U.S. federal court – to be issued to VW dealers in the US affected by the company’s diesel-emissions scandal – is viewed as “credit positive” by Moody’s Investor Services.
The final settlement should buoy the outlook for the outstanding floorplan ABS transactions issued by VW Credit Inc., because not only will dealers benefit from cash payouts and inventory repurchases, the dealers will continue to receive manufacturer incentive payments for a period of 12 months, Moody’s said in its February ABS Spotlight report.
VW will compensate each dealer an average of $1.85 million within 19 months, and continue to make payments for volume-based and customer satisfaction for 12 months following the settlement. The payments will be issued to 652 authorized VW dealers.
“Although VW floorplan losses have been de minimus, and the VW U.S. floorplan ABS trust has never incurred a loss, the settlement partially alleviates financial pressure dealers have faced following the emissions crisis,” Moody’s wrote. “As a result of increased financial stability, the probability of default among dealers will decline.”
The final settlement, approved by Judge Charles Breyer of the US District Court for the Northern District of California, resolves litigation with the affected dealer, following the disclosure in 2015 that the automaker had equipped diesel-powered vehicles with devices designed to evade emissions-testing standards.
