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Rating Action:

Moody's Downgrades the Class A Notes issued by Titan Europe 2007-1 (NHP) Limited

07 Nov 2014

Approximately GBP 408 Million of CMBS Affected

Frankfurt am Main, November 07, 2014 -- Moody's Investors Service has downgraded the ratings of the Class A Notes issued by Titan Europe 2007-1 (NHP) Limited.

Moody's rating action is as follows:

....GBP435.85M(current outstanding balance of GBP408M) A Notes, Downgraded to Caa1 (sf); previously on Feb 12, 2013 Downgraded to Ba3 (sf)

Moody's does not rate the Class B, Class C, Class D, Class E, Class V and the Class X Notes.

RATINGS RATIONALE

Today's downgrade reflects the recent notices relating to the enforcement of the loan security and the execution of a sale and purchase agreement (SPA) as well as the uncertainty around the ultimate recovery for the Class A Notes. The ultimate recovery will depend on the ranking and the ultimate amount of swap arrears in the transaction. Moody's notes that a determination that the arrears rank junior will result in zero losses to the Class A Notes, but significant losses if the full Issuer level unpaid swap amounts plus potential accruing interest was to rank senior to the Class A.

Methodology Underlying the Rating Action:

The principal methodology used in this rating was Moody's Approach to Rating EMEA CMBS Transactions published in December 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Other factors used in this rating are described in European CMBS: 2014-16 Central Scenarios published in March 2014.

Factors that would lead to an upgrade or downgrade of the rating:

Main factors or circumstances that could lead to a downgrade of the rating are generally a reduction in the anticipated recovery rate for the Class A Noteholders, driven by an unsuccessful completion of the borrower group sale or a determination that the full Issuer level swap arrears rank ahead of the Class A Notes including some accruing interest thereon.

Main factors or circumstances that could lead to an upgrade of the rating are generally an increase in the anticipated recovery rate for the Class A Notes, driven by a determination that the swap arrears rank junior to the Class A Noteholders.

LOSS AND CASH FLOW ANALYSIS:

As pointed out above, the ultimate loss for Class A can be zero if the swap arrears rank junior, but the losses can be significant if the full Issuer level unpaid swap amounts plus potential accruing interest was to rank senior to the Class A.

MOODY'S PORTFOLIO ANALYSIS

Titan Europe 2007-1 (NHP) Limited represents a true-sale securitisation of a GBP 610 million Senior A Loan extended to The Libra Borrower, and secured by a portfolio of initially around 300 care homes located across the UK. Additionally, a GBP 534 million Junior B Loan was provided to The Libra Borrower that has not been securitised in this transaction, but is secured by the same portfolio. HC-One Limited, a recently formed wholly-owned subsidiary of the Libra Borrower that was created in 2011 prior to the collapse of Southern Cross Healthcare, operates the majority of care homes in the property portfolio. A mix of third party tenants operate the remaining care homes.

On November 3 and November 5, the Issuer and the Special Servicer gave notices relating to the enforcement of the loan security and the execution of a SPA relating to the disposal of the shares in the borrower group. As a consequence the properties and the operating company will be sold with a target date of November 12. Out of the gross sales proceeds of GBP 477.7 million, an estimated GBP 457.6 million is expected to be available to the Issuer in its Collection Account. Moreover, another GBP 17.4 million are expected to be available stemming mostly from formerly trapped sales proceeds.

The uncertainty on the ultimate recovery of the Class A notes centers around the amount payable to the swap counterparty on swap arrears and the ranking of these payments. First and foremost, the ranking of the swap arrears is still subject to a discussion between the parties, and the Cash Manager may seek for court direction with respect to the ranking of the payments to the Forward Swap Provider. We have assumed swap arrears to rank senior in our analysis, even though the documentation is not clear in our view.

A November 5 notice quantified the projected Issuer level unpaid periodic swap payments to be approximately GBP 133.1 million on the January 2015 IPD. In case the full unpaid periodic swap amount ranks ahead of the Class A Notes, the total loss of the Class A can amount to just below 20% of the current outstanding principal. This takes into account that the existing servicing advance and accrued interest of GBP 14.9 million will rank ahead of the Class A Notes. If the unpaid period swap amounts rank junior, the Class A Notes will likely not experience a principal loss. Consequently -- assuming the sale will be executed as expected per SPA- the ultimate loss (or non loss) will depend on the outcome of the discussions of the parties re swap ranking and potentially sizing, or the ultimate view of the court with this respect.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Moody's did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments related to the monitoring of this transaction in the past six months.

Moody's describes its loss and cash flow analysis in the section "Ratings Rationale" of this press release.

Moody's did not use any stress scenario simulations in its analysis.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Oliver Schmitt
Vice President - Senior Analyst
Structured Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Andrea Daniels
Associate Managing Director
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's Downgrades the Class A Notes issued by Titan Europe 2007-1 (NHP) Limited
No Related Data.
© 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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​
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