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Announcement:

Moody's affirms rating of Class A2 CMBS Notes issued by Perseus (European Loan Conduit No. 22) plc (ELoC 22)

23 Feb 2011

GBP 194 Million of CMBS affected

London, 23 February 2011 -- Moody's Investors Service has today affirmed the rating of the following class of Notes issued by Perseus (European Loan Conduit No. 22) plc (ELoC 22) (amounts reflect initial outstandings):

GBP194M Class A2 Notes, Affirmed at Aa3 (sf); previously on Sep 22, 2009 Downgraded to Aa3 (sf)

Moody's does not rate the Class A3, Class B, Class C and Class D Notes issued by European Loan Conduit No. 22 p.l.c. The rating of the Class A1 Notes was withdrawn in October 2010 upon full repayment. Today's rating action takes Moody's updated central scenarios into account, as described in Moody's Special Report "EMEA CMBS: 2011 Central Scenarios".

RATINGS RATIONALE

The key parameters in our analysis are the default probability of the securitised loans (both during the term and at maturity) as well as our value assessment for the properties securing these loans. We derive from those parameters a loss expectation for the securitised pool.

Based on Moody's revised assessment of these parameters, the loss expectation for the remaining pool, which now only consists of three loans has increased significantly since the last review in September 2009. However, this is mitigated for the Class A2 Notes by the good credit enhancement level, low note-to-value (NTV) level, and the sequential payment allocation of all further principal receipts.

The overall default probability of the remaining underlying loans as assessed by Moody's has increased since the last review due to a re-assessment of the refinancing risk. Moody's weighted average whole loan to value (LTV) ratio is considerable at 147%. The Major Belle Loan (17.5% of current pool), which exhibits a Moody's whole loan LTV of 161%, is currently in special servicing due to failure to fully refinance at maturity in October 2010. The remaining two loans, Yate (50% of current pool) and Mapley Columbus (32.5% of current pool), which show Moody's whole loan LTVs of 155% and 126% respectively, are due to be repaid in July 2012. As Moody's expects limited increase in commercial property values in the next two years, combined with the high leverage on the loans at their maturity dates in July 2012, there is a high likelihood of both these loans defaulting at loan maturity.

If these loans default at maturity, they will need to be worked-out during the two-year tail period of the transaction given the legal final maturity date of the notes is in July 2014. There is currently limited visibility on the actions that will be taken by the Servicer/Special Servicer upon potential default of the loans at maturity. In its rating of the Class A2 Notes, Moody's took into account the probability that the properties could be sold at distressed prices with the aim of recovering the principal before the legal final maturity of the Notes.

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 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 amortization 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 weakness in the occupational and lending markets. Moody's anticipates (i) delayed recovery in the lending market persisting through 2012, while remaining subject to strict underwriting criteria and heavily dependent on the underlying property quality, (ii) values will overall stabilise but with a strong differentiation between prime and secondary properties, and (iii) occupational markets will remain under pressure in the short term and will only slowly recover in the medium term in line with the 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 rate with elevated fiscal deficits and persistent unemployment levels.

MOODY'S PORTFOLIO ANALYSIS

Perseus (European Loan Conduit No. 22) plc represents the securitisation of initially five commercial mortgage loans originated by Morgan Stanley Bank International Limited that were secured by first ranking mortgages on 371 mainly office and retail properties located across the UK.

As of January 2011, the transacton's total pool balance was GBP 128.2 million, down by 75% since closing. Since our last review of the transaction in September 2009, one loan, the Major Belle Loan has been transferred into special servicing due to failure to fully refinance at loan maturity in October 2010. The Columbus Court Loan (13.8% of original pool balance) initially defaulted at its maturity date in October 2010, but was subsequently repaid in January 2011 following the loan's transfer into special servicing. Similarly, the Ladysmith Loan (5.6% of original pool balance) had defaulted at its maturity in July 2010, but was subsequently fully repaid in October 2010 while in special servicing. Furthermore, there was a considerable prepayment of the Mapeley Columbus Loan (56.2% of original pool balance) in October 2010 after property disposals. As the transaction's sequential payment trigger was breached in October 2010, all loan repayments and prepayments have been allocated sequentially to the Notes resulting in the full repayment of the Class A1 Notes and a substantial pay down of the Class A2 Notes.

Currently, the largest loan in the pool is the Yate loan (50% of pool balance). The loan is secured by a secondary shopping centre located in Yate. The reported vacancy rate as per the January 2011 IPD is approximately 13.3%. The loan continues to be in breach of its LTV covenant. The current reported LTV on this loan is 82.5% compared to the current Moody's LTV of 155%. Moody's property value estimate considers the (i) secondary quality of the building and (ii) some potential rental income deterioration because of expiring leases. In Moody's assessment, the refinancing risk for the loan, which matures in July 2012 has increased significantly since Moody's last review.

The second largest loan in the pool is the Mapeley loan (32.5% of pool balance). The loan is secured by 171 office and retail properties located throughout the UK. The properties are primarily let to Santander (Aa3) contributing 84% to the current total income. The reported vacancy rate as per the January 2011 IPD is approximately 21.3%. The current UW LTV of this loan is 56% compared to the current Moody's LTV of 126%. The refinancing risk for the loan, which matures in July 2012, has increased significantly since Moody's last review.

As mentioned, the Major Belle Loan (17.5% of pool balance) is currently in special servicing due to failure to fully repay at its loan maturity date in October 2010. As per the latest available special servicing notice on this loan the Special Servicer is in discussions with the borrower regarding a potential restructuring of the loan. The Special Servicer is currently reviewing the terms of this proposal as well as alternative options. The current UW whole loan LTV of this loan is 68% compared to the current Moody's whole loan LTV of 160%. Moody's property value estimate considers the (i) secondary quality of the building and (ii) some potential rental income deterioration because of expiring leases. Moody's expects very high losses to be realized on this loan.

Portfolio Loss Exposure: Moody's expects a very high amount of losses on the securitised portfolio, stemming mainly from the performance and the refinancing profile of the securitised portfolio. Given the default risk profile and the anticipated work-out strategy for defaulted and potentially defaulting loans, these expected losses are likely to crystallise only towards the end of the transaction term.

RATING METHODOLOGY

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

In addition, Moody's publishes a weekly summary of structured finance credit, ratings and methodologies, available to all registered users of our website, at www.moodys.com/SFQuickCheck.

The updated assessment is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's prior review is summarised in a Press Release dated 22 September 2009. The last Performance Overview for this transaction was published on 8 December 2010.

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
Kamini Pithia
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Frankfurt am Main
Oliver Moldenhauer
Vice President - Senior Analyst
Structured Finance Group
Moody's Deutschland GmbH
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 rating of Class A2 CMBS Notes issued by Perseus (European Loan Conduit No. 22) plc (ELoC 22)
No Related Data.
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