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Announcement:

Moody's affirms ratings of CDS and CMBS Notes issued by Stability CMBS 2007-1 GmbH

12 Aug 2010

EUR 894.6 million of EMEA CMBS affected

London, 12 August 2010 -- Moody's Investors Service has today affirmed the rating of the Senior CDS and Classes A+, A, B, C, D and E of CMBS Notes issued by Stability CMBS 2007-1 GmbH (amounts reflect initial outstandings):

EUR726,800,000 senior credit default swap, Affirmed at Aaa (sf); previously on May 22, 2007 assigned Aaa (sf)

EUR500,000 Class A+ Floating Rate Credit Linked Notes due May 2022, Affirmed at Aaa (sf); previously on May 22, 2007 assigned Aaa (sf)

EUR31,800,000 Class A Floating Rate Credit Linked Notes due May 2022, Affirmed at Aaa (sf); previously on May 22, 2007 assigned Aaa (sf)

EUR46,400,000 Class B Floating Rate Credit Linked Notes due May 2022, Affirmed at Aa2 (sf); previously on May 22, 2007 assigned Aa2 (sf)

EUR30,500,000 Class C Floating Rate Credit Linked Notes due May 2022, Affirmed at A2 (sf); previously on May 22, 2007 assigned A2 (sf)

EUR30,400,000 Class D Floating Rate Credit Linked Notes due May 2022, Affirmed at Baa2 (sf); previously on May 22, 2007 assigned Baa2 (sf)

EUR28,200,000 Class E Floating Rate Credit Linked Notes due May 2022, Affirmed at Ba3 (sf); previously on May 22, 2007 assigned Ba3 (sf)

Moody's does not rate the Class F of Notes issued by Stability CMBS 2007-1 GmbH.

1) Transaction Overview

Stability CMBS 2007-1 GmbH closed in 2007 and represents the synthetic securitisation of initially 218 commercial mortgage loans granted to 91 distinct borrower groups and secured on aggregate by 119 properties located in Europe. The loans were originated by IKB Deutsche Industriebank Aktiengesellschaft ("IKB") in the course of its ordinary commercial mortgage loan activity, and are serviced by IKB. At closing of the transaction, the portfolio was replenishable up to a maximum amount of EUR 300 million in accordance with certain criteria. However, following a replenishment termination event in November 2009, the protection buyer lost its right to replenish the portfolio. Since closing of the transaction, the reference portfolio has reduced from EUR 909 million to EUR 770 million as per April 2010, for 189 claims to 96 distinct borrower groups . The portfolio's concentration has slightly increased as shown in a current Herfindahl Index of 25 compared to 32 at closing. The main property type remains office building, at 59% of the portfolio compared to 53% at closing, followed by mixed use and retail properties. The asset location remains predominantly Germany with 90% of the pool (the same level as at closing) with the remaining being almost equally distributed across Austria, the UK, Luxembourg, the Netherlands and Switzerland.

The structure is sponsored by KfW, which provides credit protection to IKB for the reference portfolio. KfW in turn hedges its exposure through a senior credit default swap and the issuance of certificates of indebtedness to the issuer, Stability CMBS 2007-1 GmbH. The issuer financed the acquisition of the certificates through the issuance of credit-linked notes to investors. The legal final maturity of the transaction is 2022.

No credit event nor loss claim were reported since closing, and as per the most recent investor report, there is no current delinquency.

2) Rating Rationale

In the course of its annual review of the transaction, Moody's obtained updated information about each of the loans and re-assessed the performance of the securitised portfolio and its future performance expectations. Moody's estimated the magnitude of the increase in the term and refinancing default probability for each loan as well as the realised and further expected value decline of the underlying property collateral. Moody's focused its analysis more particularly on the four largest loans in the portfolio. Furthermore, potential operational risks of the transaction were analysed in light of the current credit situation of the loan originator and servicer, IKB.

Today's affirmations were prompted by several counter-balancing factors, and in particular the following negative credit aspects:

(i) The negative performance of the German, British and Dutch commercial property markets since closing of the transaction in 2007 and Moody's opinion about the future performance of these markets; and

(ii) The increased refinancing risk of the securitised loans, in particular for the largest loans in the pool. More than 50% of the portfolio in value is due for refinancing between now and end 2013, and Moody's expects the real estate lending market to remain under pressure for the next years.

In Moody's view, the above negative credit factors are mitigated by:

(i) The very low levels of arrears and delinquency historically, and the absence of credit events to date;

(ii) The relatively moderate LTV levels of most of the borrower groups, as currently estimated by Moody's. Moody's estimates in this case that refinancing is more realistic than in comparably more leveraged transactions. The current Moody's estimated weighted average LTV of the loans is 82%, by comparison to 62% for the underwriter's LTV. The underwriter's weighted average LTV is based on property values at closing or replenishment. Moody's LTV accounts for the Moody's estimated fall in commercial real estate values in the German and other continental European markets since closing and replenishment. Moody's also took into account the vacant possession value of single-tenanted properties when modeling recovery values; and

(iii) The fact that despite some replenishment, the capital structure has deleveraged through scheduled repayment and prepayment since closing. The purely sequential nature of the transaction has lead to increased credit enhancement for the senior CDS and all the classes of Notes rated by Moody's.

3) Rating outlook

Given that replenishment is no longer possible, continuing loan repayments and prepayments will further increase the credit enhancement available to all rated classes of Notes. In case of a continued solid performance of the loans, this may generate upgrade pressure on the ratings.

4) Rating Methodology

The principal methodologies used in monitoring the transaction are "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, which are available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website. The last Performance Overview for this transaction was published on 21 June 2010. 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.

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).

Frankfurt am Main
Marie-Jeanne Kerschkamp
MD - EMEA Structured Fin
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Thomas Babin
Analyst
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

Moody's affirms ratings of CDS and CMBS Notes issued by Stability CMBS 2007-1 GmbH
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.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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