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Announcement:

Moody's affirms Class A ratings of CMBS Notes issued by VULCAN (European Loan Conduit No. 28)

25 Mar 2011

EUR 783.2 million of Notes affected

London, 25 March 2011 -- Moody's Investors Service has today affirmed the ratings of the below referenced classes of Notes issued by VULCAN (European Loan Conduit No. 28)

("ELoC 28") (amounts reflect initial outstandings):

EUR 856.265 million Class A Notes; affirmed at Baa2 (sf); previously on 13 November 2009 downgraded to Baa2 (sf)

EUR 0.05 million Class X Notes; affirmed at Aaa (sf); previously on 9 August 2007 assigned Aaa (sf)

Moody's has not assigned ratings to the Class B, Class C, Class D, Class E, Class F or Class G Notes of ELoC 28. Today's rating action takes Moody's updated central scenarios into account, as described in Moody's Special Report "EMEA CMBS: 2011 Central Scenarios" available on www.moodys.com.

RATINGS RATIONALE

The key parameters in Moody's analysis are the default probabilities of the thirteen loans backing the Notes (both during their term and at maturity) as well as Moody's value assessment for the portfolio of properties securing each of those loans. Using those parameters a loss expectation was derived for the securitised loan pool. Based on a re-assessment of the parameters, the loss expectation for the pool increased compared to the last rating action in November 2009.

The main driver of the increased expected losses is the higher refinancing risk now assumed for the loans. Excluding the PFF Paris Portfolio loan, which repaid in March, EUR 176.2 million (25.9%) of the securitised pool will need to refinance in 2011. A further EUR 100.4 million matures in 2013 and EUR 379.1 million in 2014. Commercial real estate backed lending is still severely constrained in Europe, and Moody's expects that lending markets will only see gradual improvements for the prime sector, while availability of financing for secondary property will not improve before 2012/13.

Moody's updated its valuation for each of the properties, taking into account recent rent roll information and letting activity in the portfolio. The weighted average Moody's securitised LTV (again excluding the PFF Paris Portfolio Loan) is 104.6%. This compares with an underwritten LTV of 77.4%, albeit most of the underwriter valuations have not been updated since the loans were securitised. The combination of high leverage and increased refinancing risk have together resulted in an increase in the pool's expected loss. Offsetting the impact on the ratings of the increased expected losses, is the fact that the transaction is currently in sequential amortisation mode, and is expected to remain so for the forseeable future. Furthermore, the second largest loan in the pool, the PDF Portfolio Loan (currently EUR 98.5 million securitised balance, or 14.5%) is due to refinance in November 2011. Should it successfully refinance, this will further increase the credit enhancement available to the senior Noteholders.

The Class X Noteholders are entitled to excess spread, prepayment fees and other ancillary income. The rating of the Class X Notes addresses the likelihood of receipt of excess spread amounts if any. The risk profile of the Class X Notes is therefore different from the risk profile of the other classes of Notes and as such, the rating of these securities are not affected to the same extent as the other Notes to changes in the credit risk of the loan portfolio.

Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated during the current review. Even so, deviation from the expected range will not necessarily result in a rating action. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortisation and loan re- prepayments or a decline in subordination due to realised losses.

Primary sources of assumption uncertainty are the current stressed macro-economic environment and continued weaknesses in the occupational and lending markets. Moody's anticipates (i) delayed recovery in the lending markets, persisting through to 2012, while lending will remain subject to strict underwriting criteria and heavily dependent on underlying property quality; (ii) that values will overall stabilise but with a strong differentiation between prime and secondary properties, and (iii) that occupational markets will remain under pressure in the short term and will only slowly recover in the medium term in line with anticipated economic recovery. Overall, Moody's central global scenario remains 'hooked-shaped' for 2011; we expect sluggish recovery in most of the world's largest economies, returning to trend growth rates with elevated fiscal deficits and persistent unemployment levels.

As of the February 2011 interest payment date, the transaction's total pool balance was EUR 783.21 million, down from EUR 1076.4 million at closing. In March 2011, the PFF Paris Portfolio Loan repaid, so the pool balance reduced to EUR 680.4 million. The loan pool now consists of 13 loans - down from 15 loans at closing - with each loan being secured by mortgage(s) over commercial property located in Germany or France. To date, no loan has experienced a principal loss. However a significant proportion of the portfolio has had a payment default: in total four loans, representing 49.6% of the original securitised loan balance at closing. Out of these loans, the EUR 378.96 million Tishman German Office Portfolio Loan had a payment default during its term, was subsequently restructured and is no longer classed as being in default. The EUR 125.00 million PFF Paris Portfolio Loan defaulted at its maturity date, but was subsequently redeemed on 17 March 2011. Two loans, amounting to EUR 29.96 million, or 4.4% of the total current loan balance are still in default and are consequently also specially serviced. A further five loans, representing EUR 201.2 million or 29.6% of the pool are watchlisted. The main reason for watchlisting the loans has been forthcoming maturity dates or projected reductions in future rental income.

RATING METHODOLOGY

The principal methodologies used in rating and monitoring this transaction were "Update on Moody's Real Estate Analysis for CMBS Transaction in EMEA" June 2005 and "Moody's Updates on its Surveillance Approach for EMEA CMBS" March 2009.

The updated assessment is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. The last Performance Overview for this transaction was published on 5 January 2011. For updated monitoring information, please contact monitor.cmbs@moodys.com. To obtain a copy of Moody's Pre Sale Report on this transaction, please visit Moody's website at www.moodys.com or contact our Client Service Desk in London (+44-20-7772 5454).

London
Lisa Macedo
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Christophe de Noaillat
Senior Vice President
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's affirms Class A ratings of CMBS Notes issued by VULCAN (European Loan Conduit No. 28)
No Related Data.
© 2018 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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